"New Economy" Wave Detonates Asset Investment: Regional Differentiation of Commercial Markets in First-tier Cities

The "new economy" and alternative investment are promoting the recovery of China's first tier cities's commercial real estate market.

After the adjustment period, the commercial market in first-tier cities began to turn around at 202 1 and continued to heat up. In 20021year, the total transaction volume of commercial real estate in China reached 225.3 billion yuan, among which logistics and life science projects occupied an important position in the wish list of institutional investors. The recent case is that Kaide Group, which has been focusing on commercial real estate investment, acquired the logistics real estate asset package at the end of 20021700 million yuan.

Pan, CEO of CapitaLand Investment (China), revealed that CapitaLand has laid out new economic industries in order to continuously expand the scale of assets under management.

The strong recovery of the commercial market in first-tier cities benefited from diversified tenant types. In the market environment with large supply, especially in non-central business districts, the vacancy rate was effectively reduced and the rent growth was supported.

While warming up, the market differentiation is also obvious. Although office assets continue to dominate the transaction volume of first-tier cities, a large number of new supplies in non-core areas have also contributed to the differentiation of investment.

Generally speaking, Shanghai is still in the forefront of China's commercial real estate investment market, accounting for about half of the country's total turnover. With its excellent business environment, strong market demand and investors' preference for stable returns, Shanghai will continue to be favored by the investment market. Looking forward to 2022, investment institutions will be more subdivided, and the ability to maximize the value of assets will become the key to future acquisitions.

It warmed up again after the cold snap.

There are multiple factors in the recovery of commercial market in first-tier cities.

First of all, supply and demand are booming. In addition to the large increase in supply, the absorption of first-tier cities in the past year has also reached a new high. For example, the annual net absorption of commercial office buildings in Beijing reached 6.5438+0.094 million square meters, a record high; The annual vacancy rate is 17. 1%. Except for Wangfujing, which was vacated due to tenant integration, Zhongguancun, Wangjing, Tongzhou and Shijingshan were affected by new supply, the vacancy rates of other major business districts all declined to varying degrees. Driven by strong demand, the vacancy rate decreased by 0.8 percentage points year on year.

It is a fact that the pent-up or delayed demand in first-tier cities during the epidemic has been fully released this year. Beijing TMT and the industry contributed 60% of the new lease demand in the whole year, of which more than 60% came from head enterprises.

In terms of investment market, Beijing's total turnover exceeded 60 billion yuan, and market activity and liquidity continued to improve. In the fourth quarter, the main transactions were two data center projects, Building and Dr. Peng.

Sun Ling, director of investment and capital market in East China of Jones Lang LaSalle, pointed out that in the second half of 20021,investors in Shanghai commercial market paid more attention to alternative investment projects. For example, in the past year, Shanghai Zhangjiang Plate made six asset transactions with favorable market conditions and strong sub-market cluster effect. Buyers mainly come from local and international institutional investors, including end users and insurance companies.

Secondly, under the background of developing digital economy, the expansion demand of high-tech head enterprises has become one of the main driving forces of the office market. In Shenzhen, the total turnover of the block trading market exceeded 20 billion yuan, and the main buyers were technology entrepreneurs, leading the asset transactions. The demand in the field of science and technology ranks first, and the demand for new leasing accounts for 47.8%, of which more than 90% comes from technology Internet companies, followed by the financial sector.

Looking at the Shenzhen office market, based on the dual-core drive of TMT and finance and the multi-level development of various industries, the net absorption of 202 1 year exceeded 1.3 million square meters, more than twice that of 2020.

Finally, it is the rebound of overseas capital activities. In 20021,the overall commercial real estate investment market picked up, and the total transaction volume in Beijing exceeded 60 billion yuan, the second highest value in the past five years, second only to 80 billion yuan in 20 19 before the epidemic. Compared with last year, the activity of large-scale transactions has been significantly improved, with nearly 60 transactions recorded by * * *, and the total turnover is 35% higher than last year. The investment momentum of office buildings has not diminished, and the annual turnover accounts for about 56%. The case with the highest turnover was the SK Building, which sold for 9.06 billion yuan in the second quarter. Famous cases include Brookfield's acquisition of Yue Hui Vanke Plaza.

Pang Shudong, head of investment and capital market business of Jones Lang LaSalle in China, said that in the post-epidemic era, the activity and liquidity of Beijing's commercial real estate investment market have been significantly improved. At the end of 20021,there were still many transactions under negotiation. Beijing's strong fundamentals have enhanced capital confidence. It is expected that more high-quality properties will enter the market in 2022, and market transactions will be more active.

It is worth noting that at the moment when financing for housing enterprises is becoming more and more urgent, more high-quality investment opportunities will be released to the market, providing more opportunities for capital collection and acquisition.

Gu, head of CB Richard Ellis Shenzhen Investment and Capital Market Department, pointed out that due to the continuous high new supply and the impact of macro-policy adjustment on the capital flow of some developers, it is expected that the number of office projects sold in the market as a whole will increase in the coming year. From the demand side, on the one hand, investors have been actively concerned about the Shenzhen office market in order to seek projects with appropriate prices; On the other hand, thanks to multiple favorable policies, an urban development platform linking domestic and foreign markets and a good ecological chain of science and technology industry, Shenzhen has continuously attracted a large number of office buyers to invest. With the increase of saleable properties in the market, it is expected that the negotiation space of office transaction price will become larger to a certain extent, thus attracting the purchase demand including self-use buyers and investment buyers.

As Ji Gang, head of the investment and capital market department of CB Richard Ellis in North China, pointed out, investors are paying more and more attention to the current rental return level and cash income of the transaction object, and put forward higher requirements for the asset management ability of the project operator.

In addition, the steady promotion of public offering REITs will provide more financing and exit channels for industrial parks, warehousing and logistics, data centers, long-term rental apartments and other assets with R&D office buildings as the main body, and it is expected to attract more investors' attention in 2022.

distinguish

They are all incremental market supply, but the new supply level, market vacancy rate and rent level in first-tier cities have obviously differentiated.

In terms of new supply, the growth trend is different from the other three cities. Although there are about 740,000 square meters of high-quality office buildings in Guangzhou in 2022, it is 2 1% less than 202 1.

In terms of vacancy rate, Jones Lang LaSalle data shows that the demand in Beijing market, which is dominated by domestic TMT industry, is strong, which has promoted the rapid removal of the project, and the overall market vacancy rate has returned to the pre-epidemic level at the end of 20 19. The vacancy rate in Guangzhou has been pushed to a five-year high. At the end of the year, the overall vacancy rate reached 1 1.9%, up 2.9 percentage points year-on-year.

In terms of rent, in the third quarter, the rent level of Beijing and five core business districts continued to rise, returning to the same period last year, which was 337.6 yuan and 389.4 yuan per square meter per month, respectively, up 1.7% and 1.2% from the previous month. However, there is still downward pressure in some areas such as Yansha, Olympic Sports Center and East Second Ring Road.

In Shanghai, owners' confidence in the market has increased, which in turn has pushed up rents. In the fourth quarter of 20021,the rent of the central business district increased slightly by 1.0% month-on-month and by 1.7% year-on-year. The active rental demand throughout the year promoted the overall rent of Puxi CBD to increase by 3.3% year-on-year, the rent of Pudong CBD remained stable throughout the year, and the rent of non-CBD market increased by 6.4% year-on-year. The rental performance of Qiantan and other sectors is particularly eye-catching.

However, in the fourth quarter of 20021,the rent of commercial office buildings in Guangzhou decreased by 0.7% month-on-month and 1.2% year-on-year. However, the average rent began to stabilize in the fourth quarter.

It is worth mentioning that due to the extensive attention of ESG, the demand of tenants for green buildings is rising. In 2020, 57% of the enterprises surveyed tend to choose green buildings. By 202 1, the proportion rose to 93%, and 17% of the enterprises surveyed thought that whether it was a green building would directly affect the leasing decision.

According to CB Richard Ellis' research data, in major first-and second-tier cities in China, the annual degradation rate of LEED-certified buildings increased by 2.3 percentage points in the four quarters after the outbreak, while that of non-LEED-certified buildings decreased by 1 percentage point. CB Richard Ellis believes that with more tenants implementing ESG plan, the attraction of green buildings will be further enhanced. Take Shanghai as an example, the rent of green certified office buildings is 20% higher than that of non-certified office buildings.

In 2022, the market of first-tier cities will continue to increase. Zhang Jisu, head of the tenant department of CB Richard Ellis' North China consulting and trading service office building, believes that in the short term, with the release of suppressed demand and the decline of new supply during the epidemic, it is expected that the net absorption will fall back in 2022, but it is still higher than the historical average. Driven by the 14th Five-Year Plan, the vigorous development of digital economy, high-tech industry and modern service industry will promote the diversification of market demand and inject new strength from the new economy and new track. Under the balance of supply and demand, it is expected that the overall market rent will stabilize next year, but there is still downward pressure on individual sub-markets due to the concentration of new supply.

Under the fluctuation and uncertainty of the overall market, office property in first-tier cities continues to be the first choice for investors. In bulk transactions, Beijing and Shanghai are mainly investment buyers, while Guangzhou and Shenzhen are mainly self-use buyers.

From the point of view of dtz, Jones Lang LaSalle, CB Richard Ellis and other institutions, in the short term, financial services, science and technology, life medicine and so on will remain the main driving forces of market demand. Looking forward to 2022, the Grade A office market in first-tier cities will continue to benefit from the active performance of finance, science and technology, professional services, retail and other industries. Especially in Shanghai, life science industry and escalating manufacturing trade enterprises will become new demand growth points.

Advanced manufacturing, new retail and other new economic industries will further stimulate the overall demand, and headquarters enterprises will seek overall rental or investment opportunities for single-family office buildings in non-central business districts. Rent is expected to continue to rise in the short term, but it is predicted that a large supply in the future will restrict the growth rate of rent and even bring downward pressure.