/24-7PressRelease/ - HONG KONG, July 24, 2008 - Wenchuan earthquake has limited impact on property market; tightened credit policy causes "wait-and-see" approach
The devastating Wenchuan earthquake had only a limited impact on property markets in Western, Central and Northern China. The price and supply of luxury apartments in Western and Central China experienced a slight drop, but office and industrial markets in those regions continued to display rental growth. A surge of businesses entering Chengdu's industrial parks in the wake of the quake drove up facility occupancy with rents climbed 11.2% q-o-q. Although sales revenue in Western and Central China was affected, retail was able to maintain its rental levels. Although prime retail in Xi'an slipped slightly, forecasts predict rentals for the prime retail market will get back on track and even make gains in the next quarter.
Meanwhile, the central government's macroeconomic controls and tightened credit policy continue to have an impact on the residential market, with the "wait-and-see" attitude becoming increasingly popular. Despite this, luxury apartment prices fell only slightly in Beijing and Tianjin, with prices in other major cities continuing to increase notwithstanding predictions of slower growth in the future.
Northern China
Encouraged by continued strong demand from occupiers, the prime office market in the major six cities of Northern China has performed well during the second quarter of 2008. While rentals of prime retail properties in Tianjin and Qingdao continued to increase slightly, they slipped in Dalian, Beijing, Shenyang and Xi'an as a result of brands upgrading after en bloc trading, a surge of new supply, and repercussions from the Wenchuan earthquake. The average quoted prices of luxury apartments in Beijing and Tianjin fell slightly in the wake of tightened credit policy in the first half year, but despite this, prices still increased in other major cities, driven by the higher price of new projects launched in the market this quarter. Industrial property rentals increased steadily in the second quarter.
Eastern China
In the second quarter of 2008, prime office markets in Eastern China cities experienced an upswing trend. The office rental market in Shanghai, Hangzhou, Ningbo and Nanjing experienced growth, although Grade B rents in Nanjing dropped due to increased polarization between Grade A and Grade B rents. The Eastern China retail market has also performed favourably, with all four major cities recorded healthy growth. Luxury apartments in the region witnessed accelerated growth in the period, from Nanjing's 1.1% q-o-q growth in average rental, to Shanghai's 3.6% q-o-q growth in luxury apartment price. Industrial markets in each city remained buoyant this quarter.
Southern China
Rents for prime office space stayed upswing this quarter, with growth slowing down in Guangzhou and Xiamen but accelerating slightly in Shenzhen. Of the three cities, only Guangzhou reported a 2.6% q-o-q price rise in the sales market. Residential prices in all primary markets continued to experience moderate downtrends, with the exception of the villas in Guangzhou, which witnessed a q-o-q rise of 2.4%. Rental of luxury apartments across the three markets showed signs of turning down as more stocks are shifted from the second-hand sales market to the lease market. Prime retail and industrial leasing markets were relatively stable in the quarter.
Western and Central China
Except for a slight drop in both price and supply of luxury apartments, the earthquake in May had a negligible impact on office and industrial markets, as the two continued to display signs of rental growth in the wake of the disaster. Retail also maintained rental levels, despite affected sales revenue. In the second quarter of 2008, the average rentals for Wuhan's prime office and prime retail sectors witnessed an upward trend, while both the industrial land price and average rental for industrial properties also rose. Since the impact of macroeconomic controls, the average sales price and rentals for the luxury apartment sector declined slightly; the "wait-and-see" attitude is becoming increasingly popular in the residential market.
About CB Richard Ellis
CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world's largest commercial real estate services firm (in terms of 2007 revenue). With over 29,000 employees, the Company serves real estate owners, investors and occupiers through more than 300 offices worldwide (excluding affiliate offices). CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. CB Richard Ellis is the only commercial real estate services company named one of the 50 "best in class" companies by BusinessWeek, and was also named one of the 100 fastest growing companies by Fortune. Please visit our web site at http://www.cbre.com.
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