Mingtiandi » real estate

Beijing Office Rents Jump 73% in 2011

Michael Cole — Mon, 06 Feb 2012 04:46:55 +0000

A recently published research report from real estate consultancy Cushman and Wakefield showed Beijing office rents surging 73% in 2011 with rates in Shanghai increasing by 19.7% over the year.

The Cushman report, which compared office rental rates worldwide saw rates in greater China continuing to be among the world’s most expensive, with Hong Kong now outranking New York and Tokyo as the spendiest spot to set up some desks and put down some carpet tile.

For Beijing, Cushman saw office rental rates in the fourth quarter of 2011 for grade A space standing at RMB 507/sqm/month (RMB 16.6/sqm/day for us Shanghainese) an increase of 73 percent over the same period of 2010. Vacancy rates in the nation’s capital were seen at 2.7 percent — a drop of 4.3% compared to 2010.

In Shanghai, the consultancy estimated that average rents for grade A space in the fourth quarter of 2011 were RMB 414/sqm/month (RMB 13.57/sqm/day in Shanghainese), an increase of a mere 19.7 percent over the previous year. Cushman indicated that vacancies in Shanghai accounted for only 4.8 percent of total grade A space, a decrease of 3.2 percent compared to the previous year.

All of Cushman’s rental rate numbers were based on net effective rentals.

For those of you interested in seeing the reports in detail, here are links to the the reports on RightSite:

Also, we have uploaded Cushman’s office and retail research reports for Beijing, Shanghai, Chengdu, Guangzhou and Shenzhen to RightSite, and you may view them on our research report page here.

Moody’s Predicts a Long Winter for China Real Estate Developers

Michael Cole — Mon, 06 Feb 2012 01:27:52 +0000

Flagging sales and tight credit may be causing more hurdles for China’s real estate developers than has previously been acknowledged, according to a report last week in Caixin.

The Chinese financial newspaper spoke to a number of industry observers including officials from state-run developers and representatives from credit rating agency Moody’s who foresee financial shortfalls bringing about consolidation in the industry with little meaningful policy relief.

Although there have been some indications that real estate policies may be “fine-tuned” this year, the analysts and industry players that Caixin spoke with remained skeptical about the availability of financing for real estate developers.

Speaking to Caixin, Zhong Wenquan, a vice president with Moody’s Investors Service foresaw particular hardships in 2012 for mainland developers listed in Hong Kong. According to Caixin,

Zhong said Moody’s is now “most worried about” developers who previously borrowed from overseas investors or whose stocks trade in Hong Kong, and are not allowed by regulators to issue bonds for fear they won’t repay the debt.

Some may be unable to repay foreign investors, he said, at a time when “the overseas financing market is very bleak right now, and the overall international economic situation is not optimistic.”

Just in case you are still wondering who will come out of the current developer crisis as the winners, an executive at a central government developer told Caixin that while lending will be tight across the board in 2012, he believed that,

“State-owned enterprises may have some advantages and may get a few more loans than others.”

So watch this space in the coming weeks for news of large, central government-controlled developers “assisting” smaller private or local government controlled developers by taking over sizable chunks of their shares or buying their assets.

Centralising control of real estate assets under state-owned enteprises controlled directly by the central government. Why does that sound familiar?

NDRC Squelches Mortgages for Foreigners Buying Homes in China

Michael Cole — Mon, 06 Feb 2012 00:51:31 +0000

Good news everyone! The leading minds in China’s bureaucracy have come up with an elegant solution to runaway real estate prices – stop all those foreign banks from lending money to all those foreign people buying homes in China.

The NDRC announced recently that it won’t approve medium- and long-term foreign debt quotas for overseas banks operating in China in 2012, if they intend to use such borrowings to fund mortgages taken out by foreigners.

Never mind that restrictions put in place over the last few years require any foreigner buying a home in most places in China to have worked here for at least one year and to put down at least a 50% deposit, the existential threat of foreigners buying up flats in Lanzhou demands direct and decisive intervention by China’s leading decision-making body.

Bloomberg spoke with James MacDonald, head of research at Savills in China who had this to say about the impact of this latest measure,

This is actually only going to have a perceivable impact on the mid-to-high end of the market. Foreign buyers only make up a tiny proportion of the overall China market and are not very active in the ultra high-end or mass market.

I would say that James’ assessment is generous, but perhaps he is just trying to be a nice guy.

However, if you are a foreigner in China and you were thinking of settling down here to enjoy the retirement and health benefits that the government recently required you and your employer to pay for each month, then you had better be prepared to pay 100 percent cash up front for your home.

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More Downward Data for China’s Residential Market

Michael Cole — Thu, 02 Feb 2012 12:00:53 +0000

The latest data on China’s residential real estate market is out, and the indicators continue to point down, with some analysts predicting a net 15% downturn this year compared to 2011 values.

In a report this week from Soufun and China Real Estate Index System (CREIS) the average price for housing in 100 of China’s major cities dropped for a fifth straight month in January, although the rate of decrease had moderated compared to what was seen in December.

Among the 100 markets surveyed, 60 cities recorded a drop, with 39 communities seeing a price increase. Prices are still higher than at this time a year ago, however, with the average price nation-wide of a new home in January 1.71% higher than in the same month in 2011.

According to an article in Dow Jones Marketwatch,

China Real Estate Index System said the survey of property developers and real-estate agencies showed the average home price in January was 0.18% lower from a month earlier at CNY8,793 a square meter. The average home price in December stood at CNY8,809, down 0.26% from November’s CNY8,832. The survey, which the company compiles together with online real-estate brokerage SouFun Holdings Ltd., has been widely followed since China scrapped a national property price index in February last year.

Meanwhile over in the US, market watchers are predicting a continuation of China’s residential real estate decline in 2012. Speaking at the Bloomberg Link China conference in New York on February 1st, Sonny Kalsi, a founder of GreenOak Real Estate and former global co-head of property at Morgan Stanley, commented,

“I don’t think China’s going to blow up, but prices are ahead of affordability, At a minimum, it will take some time for growth to catch up to valuations. On the less generous end, we could have real price declines of 10 to 15 percent.”

For investors wondering where former Morgan Stanley big-shots who drove through Shanghai and Beijing once and were warmly welcomed to China by their office staff would put their Middle Kingdom kuai, Kalsi further asserted,

Opportunities for investors are in “budget retail, budget hotels, not five-star hotels, affordable housing,” Kalsi said. “It’s not Class A office buildings.”

As I recall, Morgan Stanley didn’t do all that great with budget hotels in China, but I guess the point of speaking at conferences is more about making bold statements than making supportable assertions.

Questions for Fosun’s CEO Liang Xinjun

Michael Cole — Thu, 02 Feb 2012 06:45:39 +0000

Now that I’m a well-connected blogger in China’s real estate world, I have scored the opportunity to have lunch tomorrow with the CEO of Fosun, Liang Xinjun.

For those of you who need a refresher, Fosun is the parent company of the real estate developer Forte and recently made the news as part of an awkward partnership with the more flamboyant SOHO China for a development on Shanghai’s Bund.

It will be interesting to see what Mr Liang has to say about the outlook for China’s real estate market in 2012, and I will also try to ask him how it is that SOHO was able (if they really were) to buy 50% of that Bund site without Fosun’s permission, if Fosun actually had first refusal rights on the deal.

In the meantime, if any of you have questions for Fosun, please be sure to send them along and I will try to ask on your behalf.
A full report will be on Mingtiandi tomorrow.

HK’s Wharf Ups Bond Issue to $600 Mil to Meet Demand

Michael Cole — Tue, 31 Jan 2012 04:40:12 +0000

Hong Kong property developer Wharf announced today that it would be raising the size of its bond offering to US$600 million to meet demand from buyers. The bond deal, which was first announced on January 30th, met with overwhelming response from fund managers and banks, who seemed to have maintained their taste for China’s real estate market.

Wharf specialises in retail, office and hotel real estate in Hong Kong and mainland China, and its prime real estate in Hong Kong includes Harbour City and Times Square. Those two assets alone contribute 64% of its operating profit, according to published reports.

Originally, Wharf intended to make an offering of US$300-400 million, but according to a report in Finance Asia,

The deal size was expected to be $300 million to $400 million but was upsized to $600 million, after attracting demand of $4.25 billion from 296 accounts. Asian investors were allocated 73% and the rest went to European investors.

As the real estate subsidiary of Wheelock and Company Ltd and a descendant of the traditional Hong Kong trading houses, Wharf owns Marco Polo Hotels, as well as numerous commercial properties in Hong Kong and on the mainland, including Times Square on Huaihai Lu, and Wheelock Square on Nanjing Lu in Shanghai.

China Logistics Real Estate Scene Gets Competitive With Redwood Appointment

Michael Cole — Tue, 31 Jan 2012 04:03:21 +0000

The competitive world of China’s warehouse developers got a bit more crowded yesterday as regional logistics real estate developer The Redwood Group appointed Oliver Treneman as its Managing Director and country head for China.

Formed in 2006 by veterans of some of the global players in logistics real estate, Redwood Group focusses on selecting and developing logistics sites in Asia. The group currently has offices in Tokyo, Seoul, Chengdu, Shanghai and Singapore.

In January 2011, Redwood announced a joint venture with Asian Growth Properties to invest “several hundred million US dollars” in China’s logistics real estate market, and it looks like the appointment of Mr Treneman, who formerly headed AMB in China (back before it became Prologis — which sounds a lot like the Chinese name for GLP, blah, blah, blah) is a major step in helping them to compete for the sites they need to get their deals done.

Oliver has over 15 years industrial and logistics real estate experience in China, and has held the positions of Chief Operations Officer at Yupei Group (Logistics Real Estate), a JV with Equity International and country head for AMB Property Corporation (now ProLogis post merger in 2011), establishing and growing their presence in the PRC. Other former key positions include General Manager at Shanghai Business Park Development Co Ltd (JV) and Chief Representative at King Sturge & Co, Shanghai.

(I am not sure, but I think that Ollie and Sam Crispin decided in 1989 to divide China’s foreign real estate world between them, with Sam taking the commercial stuff and Oliver taking those warehouses and factories).

Now that Oliver has joined the Redwood team they will need to both compete with current players such as GLP, Goodman, and B-Logis, while trying to solve the primary problem of convincing local governments to make more land available for logisitics development.

According to Redwood’s statement,

The Redwood Group, founded in August 2006 by Charles de Portes and Stuart Gibson (the first senior officers of ProLogis to arrive full time in Asia in 1998) is an investor in and manager of logistics, distribution and warehousing real estate with top global institutional and governmental investors, particularly focused on the largest and highest growth metropolitan areas of Japan and the PRC.

The senior executives of Redwood have in combination developed, acquired and managed over 3 billion USD of distribution space globally, in seven countries totaling over 4 million m2.

So stay tuned to find out how they put that several hundred million US$ to work

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Evergrande to Bet RMB 15 Bil on Harbin Tourism Project

Michael Cole — Sat, 21 Jan 2012 05:06:01 +0000

China’s government is encouraging consumer spending — on everything except housing, so it makes sense that the country’s residential real estate developers are diversifying their investments.

For Evergrande that means making a deal with the government of Harbin to develop a RMB 15 billion resort development in this second-tier city in northeastern China’s Heilongjiang province.

According to a Bloomberg story,

Evergrande announced the deal in a statement, saying it had struck a strategic investment agreement with the municipal government of Harbin, the capital of Heilongjiang province. No timeframe was given for the investment, which will include a theme park, shops and a hotel.

The company, which is headed by Xu Jiayin — said to be one of China’s 10 wealthiest billionaires, is the second largest real estate developer in China by sales volume.

In the past, the company has focussed on residential developments in China’s second and third-tier cities, however, given the flat outlook for such investments in 2012, the company appears to be looking for new opportunities for profit.

In other headlines today, Hang Lung Group’s Chairman, Ronnie Chan spoke with Bloomberg TV about China’s real estate market.

Speaking about when he thought the government might lift restrictions on residential housing, Chan commented:

“If I were them, I’d be cautious too,” he said. The measures “have loosened a bit. But on the other hand, what assurance will they have that prices will come down on a sustainable basis.”

Of course, Bloomberg did not comment on whether Chan had a hotline to Beijing to keep him up to date on changes in the regulations, or why a retail developer would know much about housing, but TV is about entertainment — not logic.

10 More China Real Estate Stats and News Round-Up

Michael Cole — Fri, 20 Jan 2012 07:54:30 +0000

As we get ready for another long spring festival holiday here in China, the top guys in the Beijing government may just be getting a slightly larger hong-bao than usual in return for their success in achieving one of 2011′s biggest goals — cooling the real estate market.

How do you say 'ka-ching' in Chinese?

As we chronicled in our post on 6 Key Stats on China’s Real Estate Market, the National Bureau of Statistics recently released data showing that the growth in the property market in December had started to drop off at a faster rate than previously.

Now, our intrepid team here at Mingtiandi has dug up another 10 (count’em) key figures on China’s 2011 real estate market which you can use to wow your friends and bully your realtor. Here they are:

Excluding government-funded affordable housing, prices fell month-on-month in 52 of the 70 cities tracked by the bureau in December, compared to 49 in November, 34 in October and 17 in September.
Prices remained unchanged in 16 cities, the same as in November, and rose in the remaining two, both by 0.1 percent
In Shanghai, Beijing, Guangzhou and Shenzhen, where home purchase restrictions have been rigorously enforced, new home prices fell by between 0.2 and 0.5 percent from a month earlier. They dipped by between 0.3 and 0.4 percent in November.
New home prices in Nanjing, Hangzhou and Jiujiang, all in eastern China, dropped the most in December, down 0.7 percent from a month earlier, while those in Guiyang in the southwest and Yinchuan in the northwest gained 0.2 percent.
Year-on-year, nine cities saw a decrease in new home prices last month, more than double that in November.
Prices for previously owned homes fell in 51 cities in December, unchanged from November.
Prices of newly built homes in major cities such as Beijing, Shanghai, Shenzhen and Guangzhou were marginally lower compared with November, the statistics bureau’s statement said.
Wenzhou posted the largest sequential and annual slide in December, with prices falling 1.9% from a month earlier and 6.9% from a year earlier.
Prices in the 70 cities covered by the survey decreased by 0.22% on average in December from a month earlier, compared with a 0.17% decrease in November and a 0.13% increase in October.
Prices rose 1.6% on average in December from a year earlier, compared to a 2.3% increase in November.

Our heartfelt apologies to anyone who bought a home in early 2011, but if you read through the links below, there is not a lot of optimism about China’s residential market in 2012.

China Real Estate Round Up

While we try to cover as many stories as possible here at Mingtiandi, sometimes its just better to let others do the talking. So here are some stories worth running down the battery on your iPhone.

and for some more cheerful news, there is always the retail sector;

Enjoy your holiday and thanks for reading Mingtiandi during the rabbit year.

Carrefour to Open 30 New China Stores in 2012

Michael Cole — Fri, 20 Jan 2012 07:15:59 +0000

While there seem to be a growing number of pessimists regarding China’s economic outlook for the coming year, Carrefour is among the many foreign retailers planning to expand their operations in China during 2012.

According to an anonymous source within the French hypermarket retailers’ China operations, the company is actually accelerating its expansion this year and plans to open 30 new stores before December 31st, 2012. From a story in the 21st Century Business Herald,

Carrefour will open 30 new stores in China this year, up from 20-25 new openings per year in recent years, the report said.

The person said China is the fastest-growing market and holds the most potential for Carrefour, which cut operations globally in 2010 as profitability declined.

Currently, Carrefour has 203 supermarkets in mainland China, according to data compiled by linkshop.com, a domestic retail portal, ranking it second among foreign hypermarket chains in the country.

Wal-Mart Stores Inc., the world’s biggest retailer by revenue, now has more than 300 China-based stores, and world number three Tesco (UK) currently has 93 supermarkets and 12 convenience stores in China. The UK-retailer has said that it plans to invest more than RMB 19 billion in China from 2011 to 2015.