4 trends shaping GBA’s commercial real estate investment market

Total annual investment volume reaching RMB66.1b in 2023.

There will be more choices and opportunities for commercial real estate investors in 2024 because of low-interest rates, stable market conditions, changing investor behaviour, and asset allocation strategies, a report by Cushman & Wakefield revealed

Against the high global interest rate, the GBA CRE investment market performed relatively stable in 2023, with the total annual investment volume reaching RMB66.1b ($73.51b). This marks the second-highest level of the last five years.

Cushman & Wakefield said that investment volume in the GBA accounted for about 30% of the overall mainland China investment market, representing a significant jump from 18% in 2018 when the GBA initiative was first introduced, reflecting investors' growing interest in GBA CRE properties. As for transaction numbers, on the back of improving buyer sentiment in the second half of last year, there were a total of 85 transactions in the GBA area in 2023, the highest in three years.

According to Charli Chan, Cushman & Wakefield's Executive Director & Head of HK PRC Team, Capital Markets, with offshore RMB lending rates much higher than onshore rates, overseas institutional investors have often been restructuring their asset allocation amidst a high-interest rate environment, hence slowing their pace in the investment market. 

“At the same time, some real estate funds are more willing to offer discounts to attract buyers when disposing of mainland China assets. In contrast, mainland capital sources including state-owned enterprises, end-user buyers, and private investors are relatively active, seizing the opportunity to bottom-fish for long-term investment while property prices are more rational amid the relatively low borrowing rates in mainland China. In fact, domestic capital accounted for 98% of the total transaction volume in 2023," Chan said.

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Meanwhile, In terms of property type, traditional office and R&D-focused office assets continued to attract investors' attention, accounting for over half of the total investment volume in 2023. 

Over the past few months, investment appetite in commercial projects has gradually picked up, with cases of en-bloc transactions involving receivership deals where transacted prices were more attractive than the pre-pandemic level.

Chan expects low-interest rates in mainland China to remain consistent, which will in turn help support GBA investment and financing activities. Traditional property investments are expected to focus on high-end logistics portfolios with value-added potential. 

Meanwhile, the C-REIT market total value has now exceeded RMB100 billion, with an increasing number of underlying asset types, where industrial parks, rental housing, and consumer-related infrastructure projects also attracting investors' attention. 

“In addition to seeing insurance capital and financial institutions focusing on core assets with stable returns, local corporates and state-owned enterprises are actively looking for opportunities to purchase core assets in first-tier cities. We believe that investors will have more choices and opportunities in 2024, as more quality assets in the GBA will likely offer price discounts,” Chain said.

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