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 totaling 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 Daily January 11, 2008)
