/24-7PressRelease/ - BEIJING, CHINA, May 22, 2008 - High-quality new supply is shifting demand in major cities as MNCs and major domestic firms expand and upgrade. The investment property market remains healthy, though investors must be increasingly careful with offshore ownership structures. However, developers are proceeding with caution; many have postponed IPOs in Hong Kong and on the mainland due to recent equity market volatility.
North China
In the first quarter of 2008, the major cities in North China, Beijing, Tianjin, Dalian and Qingdao, witnessed an upward trend in the prime office market, with the average rental increasing slightly, aside from a slight 0.2% drop in the Qingdao market. Since a number of new projects were put into operation in this quarter, the average vacancy rate increased overall, although Tianjin¡¯s rate fell to 15.2% as there was no new supply in that city.
In the prime retail market, with new properties opening in the peripheral areas of Beijing,
the average rental dropped 0.2%, q-o-q, but rental in Tianjin, Qingdao and Dalian kept growing. Take up increased in Beijing and Tianjin, but vacancy levels were up 0.2 percentage points in Qingdao and 0.1 in Dalian.
In the luxury residential market, quoted prices in Beijing dropped 3.4% q-o-q after dramatic growth in 2007, while prices sustained steady increases in Tianjin, Dalian and Qingdao. With the upcoming Olympic Games, increasing demand has continually boosted the luxury residential leasing market.
With strong demand prevailing in the overall market, the average rental of industrial properties edged up in each of north China¡¯s four major cities.
East China
In the office sector, there was a spurt of new supply was witnessed as seven new buildings were launched in Shanghai and three in Nanjing. All the major urban markets (except Ningbo) achieved positive rental growth, while the growth rates of Hangzhou and Nanjing accelerated. Due to the traditional off-season and less optimistic market sentiments, the residential transaction volume remained low in all markets. However, there has not been a downward correction in prices, although the growth rate has slowed.
Hangzhou¡¯s ground and first floor retail rents demonstrated significant growth of 9.5% and 7.7%, respectively, while retail rents in all other major markets also trended northward. Tight supply remained. No new retail premises came on stream in any of East China¡¯s major cities. On the back of tight industrial land supply, the industrial property market in all east China cities remained buoyant. All major markets have seen stable growth in both industrial land prices and facility rents.
South China
Two Grade A office schemes, China International Center and Victory Plaza, were completed in the first quarter, bringing over 200,000 sm of prime office space to the Guangzhou market. China International Centre is now the highest building in Yuexiu District. In Shenzhen, high-quality office space in new buildings continued to be rapidly taken up by MNC tenants on a large-scale basis. Target and Sony took up 5,500 and 1,500 sm, respectively, in Phase 1 of Kerry Plaza in Futian CBD, while AIA pre-committed to 6,000 sm in Times Technology Building which will be completed later this year.
Primary luxury residential prices slipped in Guangzhou, Shenzhen and Xiamen this quarter as further macroeconomic controls went into effect. Sales volumes remained low in all three markets despite aggressive discounts being offered.
West & Central China
Prime office, retail and industrial property rents in Chengdu were all on the rise, while the rents and sales prices of luxury apartments stayed stable. The continuously booming retail market prompted the first major acquisition of 2008 as Suning bought the retail part of the Flourish Building for RMB 300 million.
In the first quarter of 2008, Wuhan¡¯s prime office, luxury apartment and prime retail sectors witnessed an upward trend in average rents and prices. The vacancy rate of Wuhan¡¯s prime office and retail property also declined this quarter. In the industrial sector, rents remained stable while land prices continued to rise. Wuhan¡¯s fifth New World Department Store opened in Xudong Avenue this past quarter, with a GFA of 30,000 sm.
Over the years, CB Richard Ellis has developed as a leading real estate service provider in Greater China. With fourteen offices in Beijing, Shanghai (Puxi and Pudong), Guangzhou, Chengdu, Tianjin, Shenzhen, Hangzhou, Dalian, Qingdao, Wuhan, Hong Kong (Hong Kong Island and Kowloon) and Taipei, as well as approximately 10 project offices and experience in over 60 cities within Greater China, CB Richard Ellis has developed a comprehensive business platform which combines the advantages of local market knowledge with the resources of a regional and global network.
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