LaSalle, Savills, CPE Funds to Explore China Rental Residential Boom on MTD TV

With global investors committing more cash to rental housing projects in mainland China, viewers of Mingtiandi’s upcoming Multi-Family Investment in China Panel will hear perspectives from panelists including Selena Shi, managing director of acquisitions and RMB Fund at LaSalle Investment Management, which is among investors that helped drive  rental housing transactions in Shanghai — the country’s commercial capital — to a record high of RMB 7.2 billion ($1 billion) in 2023, according to a report by JLL.

Shi is joining James MacDonald, head of China research at Savills, and Johnny Shao, managing director at CPE Funds Management on the panel to share strategies for navigating the rental housing market in mainland China, after JLL’s 2023 survey of 50 regional and global investors showed 93 percent of respondents planning to invest in China’s rental housing market within the next three years.

“We previously described the four phases of the rental housing market in China, which are the introductory phase, growth phase, lift-off phase, and mature phase,” Daniel Yao, head of research at JLL China said in a report from September of last year. “Considering the progress witnessed in the market, we believe that China’s rental housing market has entered the new stage of lift-off phase.”

Set to air from 10:00 AM to 11:00 AM HKT on Thursday, 21 March, the panel will feature a live Q&A session immediately following the interview in which attendees can quiz the speakers on their market outlooks in the multi-family space. Viewers can register their attendance here.

Aiming for Magnet Cities

LaSalle IM, which has now opened two rental housing projects in Shanghai under its newly established COZI brand, with another on the way next month, joins a growing club of global investors betting on Shanghai’s rental housing sector on the back of strong demand from young professionals, increasing preference for renting amid high home ownership costs, and policy support.

With median home prices in Shanghai equal to 24.1 times the median annual household income in the city, according to the Urban Land Institute’s 2023 Asia Pacific Home Attainability Index, renting has become an increasingly attractive and cost-effective alternative to home ownership. While Chinese have traditionally preferred home ownership, average monthly mortgage payments in Shanghai now are 2.3 times more than average monthly rents for a typical 90 square metre home, according to JLL.

Shifts in demographics are also driving rental demand Shanghai and other commercial hubs continue to draw in young, white-collar professionals taking on jobs in the city where they can afford to rent a comfortable home but may need to save for decades to accumulate a mortgage down payment. JLL’s survey of rental housing operators in mainland China shows some 58 percent of tenants are white-collar workers, with renters between the ages of 20 and 39 accounting for 95 percent of the tenant base.

“Rental housing investors are primarily focused on tier 1 and emerging tier 1 cities such as Shanghai, Beijing, Shenzhen, Guangzhou and Hangzhou. These cities have the following characteristics: developed economy with high GDP; high percentage of non-local residents; strong demand for rental housing; and relatively high price-to-income ratio,” JLL said in the report.

Investors have also been encouraged by government policies supporting the rental housing sector, including tax benefits, additional budgetary funds and land supply allocated in favour of affordable rental housing projects, as well as increased credit availability for rental housing developers.

The government’s designation of affordable rental housing as one of the sectors eligible for the country’s pilot real estate investment trust programme has also opened up liquidity for investors, with a C-REIT exit ranking as the third most preferred exit channel for rental housing investors after portfolio sales and single asset sales, according to JLL.

Investors Rush In

La Salle IM has announced plans to invest RMB 10 billion ($1.4 billion) in China’s rental housing sector within the next three years as JLL’s survey with its initial projects focused on Shanghai. That choice aligns with the findings of JLL’s survey, where 100 percent of respondents indicated the city as their top choice for rental residential investment.

In January, Manhattan-based developer and investor Tishman Speyer agreed to acquire a majority stake in the Holiday Inn Express Shanghai Wujiaochang for RMB 360 million ($50.4 million), with the property set to be renovated into a 305-unit serviced apartment project operated by Singapore’s Frasers Hospitality.

In September 2023, US fund manager PGIM Real Estate led a joint venture with the apartment management unit of mainland hospitality giant H World Group to acquire an apartment building in Shanghai’s Baoshan district from its developer, Hong Kong-listed Powerlong, with plans to develop a 500-unit residential project.

In September 2022, Brookfield bought a 42,000 square metre serviced apartment project in Yangpu district from mainland developers Guangzhou R&F Group and KWG Group for RMB 1.26 billion (then $180 million), with the Canadian investment giant planning to reposition the asset for launch as the first property under its Blinq branded apartment venture.