Investors looking back at high-quality assets after years of price adjustments
Six out of 10 investors expect market activity to recover by the end of this year and property investment transactions are projected to stage a growth of 5 percent-10 percent on the Chinese mainland, a report on Chinese investor intentions suggested.
The projection is based on a survey looking to offer an in-depth analysis of investors' views and strategic preferences for en bloc commercial property transactions in China this year, according to the survey published on Thursday by commercial real estate services and investment firm CBRE.
Industrial logistics and rental housing are the most favored types of assets for investors, while retail property investment is expected to continue its positive trend from 2024, according to the analysis.
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"Key office buildings in first-tier cities will maintain their attractiveness for both long-term capital and enterprises looking for self-use space," the survey said.
Geopolitics, economic recession and weak rental demand are the top three challenges for commercial real estate investment in 2025.However, commercial real estate remains an important part of investors' asset allocation, as 80 percent of people polled plan to increase or maintain the proportion of real estate assets in 2025, an increase of 5 percentage points from a year ago.
"The attractiveness of China's high-quality commercial property for investment is on a gradual rise after corrections to asset pricing, central bank interest rate reductions, as well as the positive impact of macro incremental policies on corporate and consumer confidence in 2025," said Li Ling, president of CBRE China.
As many as 61 percent of respondents believe that commercial property investment activity will recover by the end of 2025, leading CBRE's forecast for a year-on-year growth of between 5 and 10 percent for en bloc commercial property transactions across the Chinese mainland this year, the survey found.
"After several years of volatility and price adjustments in the Chinese market, some assets have shown higher investment value and they have drawn investor attention," said Eric Pang, head of capital markets for JLL China.
"As investors pay more attention to the operational management capabilities and long-term revenue generation potential of projects, high-quality assets with prime locations, stable cash flow and high value prices will continue to be sought after. Looking ahead, we expect more investors would like to seize market opportunities, therefore driving a recovery in transaction volume," said Pang.
Institutional investors remain cautious about commercial real estate, while private wealth and corporates have become more active, said the latest version of JLL's Asia Pacific Capital Tracker published in January.
"As we enter a new economic cycle in 2025, the influx of capital and competition for high-quality assets will enhance market activity, and signs of a recovery have been seen in investment and trading activity. The real estate market is at a critical juncture in the improvement of the liquidity cycle," JLL said.
Not only are institutional investors more active in key markets, but private buyers are also raising their allocation to prime locations in core markets. It is expected that along with the transaction level rise, investors will be ready to diversify their asset allocations, JLL added.
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Li said investors will focus on rental housing, regional shopping malls, high-standard logistics facilities, and Grade A office buildings in first-tier city CBDs with limited supply.
Industrial logistics is believed to continue at its top position among all investment categories, and high-standard warehouses in major Chinese cities are a primary focus, said the report. Rental housing has been the second most preferred category for three years in a row, and 18 en bloc rental housing transactions were registered in China in 2024, with a combined value of 7.5 billion yuan, CBRE said.
The tone-setting annual Central Economic Work Conference in December urged making boosting consumption a top priority for 2025.Retail property is believed to be the third most sought-after category in property investment, particularly regional shopping centers with consistent population inflows, said the survey.
Properties related to life sciences and healthcare ranked in top positions in terms of alternative assets. As the industrial adjustment of the biopharmaceutical sector gradually comes to an end, leading biopharmaceutical industrial clusters in Shanghai, Beijing, Guangzhou of Guangdong province, and Suzhou of Jiangsu province are expected to take the lead in demand recovery, CBRE said.
Its report is based on a survey conducted between Nov 12 and Nov 29, with a total of 125 valid responses.
