MORE overseas real estate investors are likely to turn to second-tier cities to take advantage of smoother administrative procedures and avoid the tough competition of core cities, industry experts said yesterday.
They said high quality offices and residential properties would remain highly sought after by overseas capital.
"Overseas investors, especially new players such as Winnington Capital and SEB, are opting to join forces with local developers in second-tier city projects," said Kenny Ho, head of research, Shanghai, for Jones Lang LaSalle. "Processing deals for approval appears to get more support, aided by healthy enthusiasm from local governments."
Joining forces with overseas companies is attractive to Chinese companies as they can tap into the expertise that overseas partners can deliver, the experts said.
The Shanghai market has already seen decreasing number of en bloc asset acquisitions over the past twelve months. The latest Jones Lang LaSalle market research has found that 29 en bloc purchases totalling 28 billion yuan (US$3.8 billion) were sealed during the past 2007, as compared to 32 acquisitions worth 24.2 billion yuan in the previous year.
Higher threshold and growing cost of investment, as well as an expected policy risk on overseas investment in the local market, might divert some overseas players to non-core cities for better opportunities, Colliers International said.
However, in general, the local real estate investment market will hold steady in 2008.
Globalization of real estate capital will affect China in 2008 and the subprime crisis in the US have made property funds, especially Japanese and American, search for investments with growth, Ho said.
In particular, industry experts predicted that Grade A offices and serviced apartments will continue to suck in most overseas capital in the local market.
Latest statistics showed that investment in offices and residential properties each grabbed 66 percent and 13 percent of total investment in Shanghai last year, topping all other sectors including mixed-use projects, logistics and retail facilities which each took 10 percent, seven percent and four percent, respectively.
Shanghai Real Estate market
Shanghai (Chinese: 上海; Pinyin: Shànghǎi; Shanghainese: /zɑ̃'he/; abbreviation: 沪; nickname: 申), situated on the banks of the Yangtze River Delta in East China, is the largest city of the People's Republic of China and the eighth largest in the world.[4] Widely regarded as the citadel of China's modern economy, the city also serves as one of the nation's most important cultural, commercial, financial, industrial and communications centers. Administratively, Shanghai is a municipality of the People's Republic of China that has province-level status. Shanghai is also one of the world's busiest ports, and became the largest cargo port in the world in 2005.
Originally a fishing town, Shanghai became China's most important city by the twentieth century and was the center of popular culture, intellectual discourse and political intrigue during the Republic of China era. After the communist takeover in 1949, Shanghai languished due to heavy central government taxation and cessation of foreign investment, and had many of its supposedly "bourgeois" elements purged. Following the central government's authorization of market-economic redevelopment of Shanghai in 1992, Shanghai has now surpassed early-starters Shenzhen and Guangzhou, and has since led China's economic growth. Some challenges remain for Shanghai at the beginning of the 21st century, as the city struggles to cope with increased worker migration, a huge wealth gap, and environmental degradation. Despite these challenges, Shanghai's skyscrapers and modern lifestyle are often seen as representing China's recent economic development.
Monday, January 14, 2008
Overseas investors join forces with locals
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