BMI View: China ' s property market is suffering from oversupply due to years of high levels of development. Rising demand is not sufficient to drive up rental rates. The government is restricting development activity in 2015 and 2016 in the retail sector with the aim of balancin g supply and demand. E-commerce firms and foreign entrants to the markets are expected to be key drivers of demand.
China's real GDP growth has been falling since 2010 from a high of 10.6% to 6.7% in 2015 and is forecast to continue falling to 5.9% in 2016. BMI forecasts the growth in real GDP to remain at this level for the foreseeable future, coming in at a slower than normal rate for the country. Within China's economy, we highlight Shanghai and Beijing as particular centresof business and finance, which are also strongly connected to the rest of the global economy. Wuhan and Shenzhen, meanwhile, are centres of industry, construction and services. Wuhan is also the fastest growing city within China, with an average forecasted annual growth rate from 2006 to 2020 of 2.87%.
We expect the office sector to see a slight drop in its rental rates across the country due to the oversupply of space. A large volume of properties are expected to be delivered in 2015, mainly in Shanghai and China, which may further lead to rise in vacancy rates and marginal decline in rentals.
The retail space in Shanghai is currently witnessing an oversupplied market. Our local sources report that the local government has realised this over-supply problem and is taking steps to normalise the deliveries of future projects. Over the course of 2015 there has been a trend of fast fashion brands entering the market. The majority of demand for fashion brands originates from the younger population in the city who have the financial means owing to the rising GDP. Rental cost in the short term is likely to remain stable, or fall marginally; however with the restriction in new projects rental price may rise in the long term.
The industrial sector is one in which is mostly like to be a hotspot for investment. This can be evidenced from the significant increases in rental rates in Shanghai, Wuhan and Shenzhen. The surge in e-commerce has entered China, which has led to an increase in industrial space demand. This will translate into e-commerce companies requiring large warehouses to store the goods that are imported. Marginal increases in demand in Shanghai and Wuhan, coupled with balanced supply is forecasted to bring a slight increase in rental rates by the end of 2015 and in 2016.
China's property investment markets seems to be unaffected by the economic slowdown that the country is experiencing. Investors are looking at the opportunities that the market is presenting and the net yields that can be realised. Property development is being restricted in the country due to the already present oversupply nature of the market; however, new projects are still due to be completed over the coming years in the office sector. Property management is seeing a more favourable investment outlook due to the aforementioned development restriction which seeks to redress the supply and demand balance.
The China Real Estate Report features BMI Research's market assessment and independent forecasts of major construction projects in the residential and commercial markets, plus rental prices and yields in major cities. The report critically analyses the prospects for real estate within the broader economic and financial context - both domestic and global - via our econometrically-modelled and clearly explained banking and economic forecasts and follows this through to evaluate the implications for REITs.
BMI's China Real Estate Report provides industry professionals and strategists, sector analysts, business investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the real estate industry in China.
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BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering real estate and construction, regulatory changes, major investments and projects and significant national and multinational company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the real estate sector and within the broader political, financial, economic and business environment.
Industry Forecasts Outlook
Historic data series (2010-2013) and forecasts to end-2019 for the domestic real estate industry and for the local and global finance industry.
- Real Estate: Office, retail and industrial real estate yields for all major cities (%); short term forecasts on minimum and maximum real estate rental prices by sub-sector (USD per square metre and local currency per square metre).
- Construction: Industry value (USDbn); contribution to GDP (%); employment (‘000); real growth (%).
- economy: Economic growth (%); nominal GDP (USDbn); unemployment (%); interest rates (%); exchange rate (against USD).
BMI’s Real Estate Risk Reward Index
BMI’s Risk Reward Indices provide investors (real estate vendors, construction companies and financial investors) looking for opportunities in the region with a clear country comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide an indices of highest to lowest appeal to investors, with each position explained.
Overview of the real estate sector, including analysis of existing/planned real estate developments and emerging industry trends in the office, industrial and commercial sectors
Features detailed city-level data and analysis on rental prices, yields, contract terms and real estate availability with separate chapters covering the office, retail and industrial sub-sectors.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate Company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.