Realty check

Commercial sense

The government curbs on residential property have prompted many foreign investors to instead park their money in commercial realty.

According to Alan Liu, managing director for North Asia at Colliers International, a global real estate services company, most developers and investors want stable income. The stable income in this case comes from more rentals and hence most are adding more commercial realty to their portfolios.

"In many advanced markets like Singapore, there are more commercial realty owners than residential landlords. That's the global trend. China will also go to the same way and we will see more developers going for single ownership, rather than selling by floors. They want to retain more rental income," Liu says.

Investment in Chinese commercial properties increased 55 percent in the second quarter of 2012, compared with the figure in the first three months of this year, Xinhua News Agency said in a recent report.

"Due to the government curbs on real estate purchases, commercial and industrial property is becoming more appealing to investors," says Lin Bo, director of the research center under the China Real Estate Corporation.

According to Lin, though there is an oversupply of property in some cities, the rapid urbanization will erase the phenomenon over the next few years, while in the commercial sector, investors should do enough market research before making a decision to avoid the oversupply.

"The oversupply in the commercial sector is something that cannot be easily solved in the short term," Lin says.

Analysts from global realtors Jones Lang LaSalle are often asked if there is too much of retail supply in China, because development tends to occur ahead of demand.

"The good news is that at the aggregate level, there is not too much supply," says Steven McCord, director of research at Jones Lang LaSalle's China branch.

The total retail stock in China's top 20 markets will grow at the same speed as the consumer class population, as defined by income. Therefore, at the macro level, the supplies are appropriate, McCord says. "However, risks lie in individual submarkets where you may find too many shopping centers appearing within close proximity to one another - this is where saturation may occur," he says.

Like commercial property, industrial property is also gaining in demand. "We will see a lot of interest in Chinese industrial property, especially after the nation moves up the value chain and starts producing more high quality and high value products," says Ben Chaston country director of global construction consultancy Turner & Townsend (Shanghai) Co Ltd, Beijing Branch.

zhaoyanrong@chinadaily.com.cn

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