Real estate investment in city picks up steam

Real estate investment activity picked up in Shanghai in the first half of 2021, with greatly improved interest from institutional buyers, according to the latest research from major international property consultancies.

Between January and June, 39 en bloc deals valued at a total of 29.4 billion yuan (US$4.54 billion) were completed in the city, an increase of 80 percent and 19 percent, respectively, from the second half of 2020, according to data released by Cushman & Wakefield.

"Shanghai's property investment market demonstrated great resilience in the first six months of this year, with major deals including Link REIT's purchase of a 50 percent stake in Shanghai Qibao Vanke Plaza for 3.2 billion yuan," said Alvin Yip, Cushman & Wakefield's China president of capital markets. "Notably, buyers with pure investment purpose accounted for 69 percent of the total transaction value, a significant rise from the 26 percent share registered in the second half of 2020."

Overseas buyers, meanwhile, accounted for 38 percent of the total transaction value, Cushman & Wakefield data showed.

For the three-month period that ended in June, a separate report released by Savills showed that 15 investment transactions valued at 13.4 billion yuan were concluded across the city, a year-on-year drop of 21 percent. The total consideration, however, could be close to 42.3 billion yuan if the estimated consideration of assets from portfolio transactions is included, according to Savills' research.

"The market is seeing a rise in interest from institutional buyers looking to capitalize on the attractive pricing environment, access to sizable portfolios and recovery of market fundamentals," said Elle Xu, senior manager of research at Savills China. "Several big-ticket portfolio transactions were announced toward the end of June, such as Blackstone's purchase of 55 percent of SOHO China for 19.5 billion yuan, Brookfield's purchase of a five-retail property portfolio from Macquarie for 8.9 billion yuan and Ping'an Insurance's purchase of partial stakes in six Raffles City developments for 33 billion yuan, all of which include one or more core or core-plus assets in Shanghai."

Looking forward, end-use buyers will remain active and more investors are likely to tap the rental housing segment – which has received growing support from the government amid robust demand for affordable housing from young professionals – mainly by converting idle or underutilized assets and exit the market by launching real estate investment trust, according to Savills' forecast.