In the first half of 2020, the transaction volume of mainland China’s real estate bulk transaction market was approximately 88.4 billion yuan. Beijing and Shanghai performed well, accounting for 80% of the transaction volume. Four first-tier cities accounted for 91%. On July 30, Cushman & Wakefield released the above data at the "Online Sharing Conference on Bulk Transaction Markets in First-Hand Cities in the First Half of the Year".

Judging from the content of the above meeting, the four first-tier cities each have their own merits. Shanghai’s large real estate transaction volume accounts for more than 50%, and Beijing has overtaken Shanghai for the first time to become the “new favorite” of foreign investment. Guangzhou's vacancy rate is at a low of 6.7, and it is known for its stability. Shenzhen is far ahead in terms of net absorption due to its strong explosive power.

For the second half of the year, Shenzhen industrial properties, Beijing Tongzhou, and Shanghai industrial parks will become investment hot spots for large real estate transactions. In addition, under the influence of the epidemic, developers may gradually launch large-scale asset packages on the market in order to accelerate the elimination of commercial stock.

Beijing catches up with Shanghai and becomes the "new favorite" of foreign investment

Statistics from Cushman & Wakefield show that in the first half of this year, the transaction volume of mainland China's real estate bulk transaction market was approximately 88.4 billion yuan. Beijing and Shanghai still performed well, with a transaction volume of approximately 70 billion yuan, accounting for 80% of the total transaction volume.

Shanghai, which holds up “half the sky” for mainland real estate transactions, has a transaction volume of 45.5 billion yuan, accounting for 52%. Demand from buyers for their own use remains strong, with Haitong Securities, Bank of Shanghai, TST Tingmi, etc. investing in the property.

In the first half of the year, the number of real estate transactions in Beijing was 24.4 billion yuan, a year-on-year decrease of 5.45%, and the overall market activity was stable. Buyers' demand for self-use is also very strong. Among the 14 transactions recorded in the first half of the year, self-use buyers accounted for 4, contributing approximately 23% of the transaction volume, exceeding the proportion for the whole of last year.

It is worth noting that Beijing performed well in terms of attracting foreign investment. In the first half of the year, it attracted 10.8 billion yuan of foreign investment, surpassing Shanghai's 10.7 billion yuan for the first time and becoming the "new favorite" of foreign investment.

Can this trend continue? Liu Bing, deputy managing director of Cushman & Wakefield's China Capital Markets Department, believes that foreign investors' optimism about Beijing has been reflected since 2018. In 2018 and 2019, the proportion of foreign capital in Beijing’s major real estate transactions was close to 30%.

Liu Bing said that the reason why Shanghai became the most important investment destination for foreign investors was because as early as 2009, the Beijing office market experienced high supply, high vacancy rate, and low rents, and foreign investors were confident in its prospects. insufficient. At that time, Shanghai was just the opposite. The market vacancy rate continued to decline, which accordingly spawned active large-scale real estate transactions in Shanghai. However, in recent years, the situation has been reversed. Beijing has become the most stable office market in the country, with the highest rents, long-term low vacancy rates, and higher rental returns than Shanghai. Therefore, foreign funds have set their sights on Beijing.

In this regard, Zhang Weimin, executive director of the East China Capital Markets Department of Cushman & Wakefield, also believes that it is a fact that the rental return rate of Grade A office buildings in the core area of ??Shanghai is lower than that of Beijing. In the next five years, more than 6 million square meters of Grade A office buildings will enter the market, equivalent to 50% of the existing stock, putting pressure on leasing. In addition, many foreign investors have bought properties in Shanghai and have begun to seek investment projects in other first-tier cities and strong second-tier cities.

However, in terms of asset realization or liquidity, Zhang Weimin believes that Shanghai performs better than Beijing because Shanghai is considered the most transparent and mature large-scale property transaction market in China, and it is often the entry point for foreign capital to enter China. First stop. In addition, its high liquidity and open policies have also attracted demand from mainland funds or self-owned customers, such as Haitong Securities’ acquisition of Greenland Huangpu Riverside Office Building and Skechers’ acquisition of Hongqiao R&F Properties.

Guangzhou has a low vacancy rate, and Shenzhen leads the way in net absorption

Compared with Beijing and Shanghai, which account for 80% of the transaction volume, Guangzhou and Shenzhen account for only 11% of the total real estate transaction volume , the total amount exceeded 10 billion yuan, a significant decrease compared with the second half of last year.

However, in the view of Su Jianting, executive director and head of the capital markets department of Cushman & Wakefield in Central China, Guangzhou’s office market is extremely stable.

Even affected by the epidemic, Guangzhou's office vacancy rate remained at a low of 6.7 in the second quarter, and rents also achieved the lowest decline among first-tier cities, demonstrating strong resilience and risk resistance. And because major institutions are using the concept of the Guangdong-Hong Kong-Macao Greater Bay Area to support Guangzhou properties, Standard Chartered Bank, Shanghai Stock Exchange, and Shenzhen Stock Exchange have all settled in Guangzhou recently.

From the perspective of Shenzhen, the transaction volume of real estate bulk transactions in the first half of the year was 5.6 billion yuan, a year-on-year decrease of 78%, but the number of transactions only decreased by 2 compared with the same period last year. The transaction amount was mainly small and medium-sized, with the average transaction amount of 500 million yuan. Yuan or so. However, if we do not take into account the two very large transactions in OCT Tower and Central City in the same period last year that increased the overall transaction value, Shenzhen's large-scale real estate transactions are still active.

It is worth noting that Shenzhen’s industrial properties have returned to the stage of large-scale real estate transactions. In the first half of the year, there were 3 industrial property transactions, contributing about 21% of the transaction volume, accounting for more than the whole of last year. Industrial properties with old renovation concepts were once a hot spot for investment in Shenzhen. After a lull in transactions last year, they began to regain popularity this year.

If investors want to take advantage of the TMT (digital new media industry) in the Guangdong-Hong Kong-Macao Greater Bay Area, how should they choose between Guangzhou and Shenzhen? Su Jianting said that Shenzhen focuses on hardware manufacturing and technological innovation, while Guangzhou focuses on online and virtual aspects, especially the gaming industry and e-commerce live broadcasts. Among them, two of the top three game companies in the country are located in Guangzhou. Driven by the industry environment, the performance of related regions is also particularly eye-catching. For example, Tianhe District ranks first in Guangzhou's GDP due to benefiting from the gaming industry. Thanks to the headquarters agglomeration effect, Pazhou has attracted well-known companies such as Alibaba, Vipshop, Xiaomi, and Gome to settle in. As a result, the demand for office space in Pazhou is increasing day by day. In the future, it may take over Zhujiang New Town and become Guangzhou's next CBD.

In the view of Chen Junru, director and director of Cushman & Wakefield's South China Capital Markets Department, Shenzhen's strong demand and growth momentum give investors confidence in the sale of Shenzhen's Grade A office buildings, and the young and dynamic population structure brings The strong demand for consumption upgrades and growth momentum in the future will also stimulate the future development of retail properties.

Chen Junru further explained that Shenzhen has a clear positioning and strong private vitality in many industries with cutting-edge international competitiveness, which has also stimulated considerable leasing demand. In the first half of this year, the net absorption of 140,000 square meters of Grade A office buildings in Shenzhen has exceeded that of the whole of 2019, and is far ahead of other first-tier cities. For example, high-tech Internet technology companies such as Huami Technology and JD.com have also made new leases or expanded leases.

As the return on investment in large-scale properties increases, developers will accelerate the elimination of commercial stock

Judging from the property types of large-scale real estate transactions in the first half of the year, office/R&D office properties are sought after by buyers. According to statistics from Cushman & Wakefield, the number of retail property transactions has declined, from 17 in the second half of 2019 to 10 in the first half of 2020. However, the investment returns of bulk properties have further improved this year. The capitalization rate of office and retail properties in first-tier cities has increased by an average of 10-30% compared with 2019, and the capitalization rate of logistics and warehousing has increased by an average of 10-20% compared with 2019.

“Although the epidemic has had an impact on the real estate bulk transaction market, investor mentality has also changed greatly as the epidemic subsided, and the market is gradually recovering.” President of Capital Markets Department of Cushman & Wakefield Greater China , said Ye Guoping, director of China Capital Markets Department.

For the second half of the year, it is expected that office building projects with stable cash flow and high occupancy rates in Shanghai will be more popular; industrial park properties will be sought after; self-use buyers will become the main force in asset acquisitions. In contrast, industrial properties will continue to become an important investment hotspot in Shenzhen's real estate bulk transaction market.

In Beijing, Tongzhou may become an important "battlefield" for large-scale real estate transactions in Beijing. In the first half of the year, China Three Gorges Corporation officially signed a contract with Tongzhou Chengda Plaza, and Jinghang Plaza will also be built into the Aegean Shopping Park in Beitou, Beijing. The frequent occurrence of the above-mentioned large-scale real estate transactions in Tongzhou also shows that the market is optimistic about the region.

Ye Guoping believes that under the influence of the epidemic, the demand for real estate financing will increase in the second half of the year, and bank financing may be relatively tight, and everyone's layout strategy will also be adjusted to some extent.

It is foreseeable that domestic institutions will continue to expand their market share in the future, and developers may gradually launch large-scale asset packages on the market in order to accelerate the elimination of commercial stock.

Beijing News reporter Yuan Xiuli Picture source DTZ

Editor Wu Xin proofread Liu Baoqing?