November-December 2017 NEWSLETTER...Property Snapshots – The Gate, China Overseas International...
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November-December 2017 NEWSLETTER Helping you to find and design the office you want. Call us at 021-6230 1919 www.sofiagroup.com The Beginning of the End for Overseas Real Estate Investment? On 18 August, this year the Chinese government rolled out its latest restrictions on overseas direct investments. Much has been made of the recent changes to regulations on investments abroad, with the results having a potentially major impact on both local and overseas markets. However, it is important to view these latest changes within a broader context if we wish to understand what the likely consequences could be. It is worth noting that the announcement of 18 August was broadly interpreted as an official codification of what began in late 2016 as a limitation on ‘irrational investments’. The latest policy creates three categories of overseas investment: banned, restricted and encouraged. Significantly, investment in real estate has been placed in the ‘restricted’ category. What does this mean? After a record breaking 2016, early 2017 already saw a reduction in the number of acquisitions of overseas properties by Chinese buyers. In the first half of 2017, overseas direct investment in property fell 82% year-on-year, according to the Ministry of Commerce. Such a drastic drop would seem to suggest that we are going see significant impacts both locally and in markets abroad that were previously supported by Chinese money. But how much can we read into these early indicators? The Statistics Due to differences in definitions and the measurements used, the official government data does not tell the whole story when it concerns overseas investments. Stop-over destinations, such as Hong Kong and Caribbean tax havens can hugely distort the picture. Some of this money is recycled back into China, a phenomenon known as round-tripping, while some of it may later be used in investments which would not then feature in China’s official statistics for ODI. With wealth continuing to find its way out of the country, while a large amount of money is already held abroad, it is likely that the 82% drop in investments reported by the government does not reflect a real fall in the number of transactions. In fact, depending on the measurements used, the official statistics and those published from within the industry can differ wildly. Some within the industry have reported Chinese overseas investment in real estate as being as high as US$100 billion for 2016. Table of Contents Market Insight – The Beginning of the End for Overseas Real Estate Investment? Company News – Boundary Internaonal Services The Scene Property Snapshots – The Gate, China Overseas Internaonal Center, Internaonal Metropolis Plaza Lifestyle – Ulmate Convenience Events – Mozart, L’opera Rock, Mitch Albom’s Tuesday with Morrie, Dance drama-Zhuhuan, Musical West Side Story in Shanghai. Dining – De Carbon Bar Market Notes 8.51 383.76 339.01 1613.08 2018.13 6604.57 15246.08 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 2004 2006 2008 2010 2012 2014 2016 USD Million Source: Ministry of Commerce of the People's Republic of China China Outbound Real Estate Investment
Transcript of November-December 2017 NEWSLETTER...Property Snapshots – The Gate, China Overseas International...
November-December 2017
NEWSLETTERHelping you to find and design the office you want.
Call us at 021-6230 1919 www.sofiagroup.comThe Beginning of the End for Overseas Real Estate Investment?On 18 August, this year the Chinese government rolled out its latest restrictions on overseas direct investments. Much has been made of the recent changes to regulations on investments abroad, with the results having a potentially major impact on both local and overseas markets. However, it is important to view these latest changes within a broader context if we wish to understand what the likely consequences could be.
It is worth noting that the announcement of 18 August was broadly interpreted as an official codification of what began in late 2016 as a limitation on ‘irrational investments’. The latest policy creates three categories of overseas investment: banned, restricted and encouraged. Significantly, investment in real estate has been placed in the ‘restricted’ category.
What does this mean?
After a record breaking 2016, early 2017 already saw a reduction in the number of acquisitions of overseas properties by Chinese buyers. In the first half of 2017, overseas direct investment in property fell 82% year-on-year, according to the Ministry of Commerce. Such a drastic drop would seem to suggest that we are going see significant impacts both locally and in markets abroad that were previously supported by Chinese money. But how much can we read into these early indicators?
The Statistics
Due to differences in definitions and the measurements used, the official government data does not tell the whole story when it concerns overseas investments. Stop-over destinations, such as Hong Kong and Caribbean tax havens can hugely distort the picture. Some of this money is recycled back into China, a phenomenon known as round-tripping, while some of it may later be used in investments which would not then feature in China’s official statistics for ODI. With wealth continuing to find its way out of the country, while a large amount of money is already held abroad, it is likely that the 82% drop in investments reported by the government does not reflect a real fall in the number of transactions. In fact, depending on the measurements used, the official statistics and those published from within the industry can differ wildly. Some within the industry have reported Chinese overseas investment in real estate as being as high as US$100 billion for 2016.
Table of ContentsMarket Insight – The Beginning of the End for Overseas Real Estate Investment?Company News – Boundary International ServicesThe SceneProperty Snapshots – The Gate, China Overseas International Center, International Metropolis PlazaLifestyle – Ultimate ConvenienceEvents – Mozart, L’opera Rock, Mitch Albom’s Tuesday with Morrie, Dance drama-Zhuhuan, Musical West Side Story in Shanghai.Dining – De Carbon BarMarket Notes
8.51 383.76 339.01 1613.08
2018.13
6604.57
15246.08
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
2004 2006 2008 2010 2012 2014 2016
USDMillion
Source:MinistryofCommerceofthePeople'sRepublicofChina
ChinaOutboundRealEstateInvestment
If we accept that an 82% fall in overseas investments is unlikely to be the final, definitive result for 2017, we should also be careful to view the final result in the context of the growth that has occurred over the past 10 years. While likely to be significantly less than 2016, overseas property acquisitions are set to be at least on a par with 2015 and around ten times the amounts that were being invested in overseas property in 2011.
However, due to the differences in measurements used it is even possible that 2017 could in fact see a rise in overseas investments from China. Although billion-dollar blockbuster deals, such as those made by Anbang Insurance and China Life Insurance, will be hit by the new restrictions, transactions from smaller, private investors may be on the rise. One international property agent has reported a 102% increase in transactions for the first 6 months of 2017.
Overseas Markets
If the local statistics seem somewhat unreliable it may be easier to look at data from common investment destinations. Vancouver experienced a fall in property sales at the beginning of 2017 that seemed to align with the news coming from China. However, recent months have shown a strong recovery that indicate the drastic impact on international markets may have been exaggerated.
Sources: Real Estate Board of Greater Vancouver
Likewise, property prices in Sydney have continued to increase demonstrating the strength of real estate markets popular with Chinese investors, despite the barriers put in place by both the Chinese and local governments. While the growth rate in Q2 2017 shrunk slightly in comparison to Q1, a 13% growth is nevertheless a very significant number.
Sources: Australian Bureau of Statistics
Larger, established investor cities such as New York and London are also demonstrating resilience to any apparent reduction in investment from China. The shortage of supply in these markets is likely to negate any substantial impact from a drop in inbound investment from China, especially when we consider that China is still fairly new to the international real estate scene.
What is the outlook?
It has been suggested that new policy may simply be a temporary slowdown, allowing the government chance to assess investments overseas, before loosening the restrictions at a later date.
On the other hand, even if the restrictions were to remain in place for the long term, there are clearly exploitable loop holes that allow for continuing investment. There may be some increase in competition for domestic investments as those put off by the new policies look to home rather than abroad. This could help to maintain high property prices within China and we should not rule out a possible increase. However, from a macroeconomic perspective, the amount of money available compared to the domestic opportunities for reliable investment necessitate significant sums of this money needing to be sensibly invested overseas.
Year-on-Year Percentage Change in Sydney House Prices
0% 2% 4% 6% 8% 10% 12% 14%
YEAR-ON-YEAR COMPARISON OF THE NUMBER OF RESIDENTIAL PROPERTY TRANSACTIONS PER MONTH FOR
VANCOUVER IN 2017
-39.50%
Jan Feb Mar Apr May Jun JulAug Sep
-41.90%
-30.80%-25.80%
-8.50% -11.50%-8.20%
22.30%25.20%30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
The Scene
Company News Boundary-Free International Services
In all areas of modern business, globalization can be conducive to progress. In order to provide seamless cross-border services worldwide, NAI firms conduct monthly conference calls and meet in person three times a year. At the most recent NAI Global convention
The Gate
China Overseas International Center
International Metropolis Plaza
Contact NAI Sofia Group Shanghai at 021-6230 1919 for further information on the three office building properties listed above, or for information on any other commercial property in the city.
Property Snapshots
Building quality: Grade A
Address: 58 Yaoyuan Road
Ceiling height: 2.90 meters
Recommended Floor/Area: 2,100 sqm
Rental/sq.m/day: RMB 5.5-7.5
Total Floors: 43 (Tower 1: 3F, Tower 2: 17F, Tower 3: 17F, Tower 4: 6F)
Metro: Direct Access to Metro Line #7 (Houtan)
Location: Pudong
Availability: Various options available
International Metropolis Plaza
With direct access to the metro and fantastic, unobstructed river views, International Metropolis Plaza offers a diverse range of high quality office spaces across its four towers. The complex includes sophisticated facilities to suit a wide variety of functions and is located in the fast-developing International Business Zone.
China Overseas International Center
China Overseas International Center is comprised of a south and north tower completed to the highest standards. With direct access to two metro lines and a lower floor shopping mall, this exceptional development provides ultimate convenience. It is surrounded by a plethora of high quality hotels and located just one stop from Xintiandi. This highly efficient, newly completed complex provides a variety of units at very attractive rates.
Building quality: Grade A+
Address: 355 East Jianguo Road
Ceiling height: 2.90-2.95 meters
Recommended Floor/Area: 2,000 to 2,200 sqm
Rental/sq.m/day: RMB 8.5-10.5
Total Floors: 50 (South Tower: 32F, North Tower: 18F)
Metro: Direct Access to Metro Lines #9, 13 (Madang Road)
Location: Huangpu
Availability: Various options available
The GateCompleted in early 2017 and located in greater Hongqiao, The Gate is comprised of 9 office buildings and a 70,000 sqm shopping mall. The developers have put a strong focus on the environment and energy efficiency, with LEED Gold Certification and China Green Building Three Star Rating. The complex benefits from excellent management and features units to suit a variety of business sizes.
Building quality: Grade A
Address: 490 Shenhong Road
Ceiling height: 2.95 meters
Recommended Floor/Area: 1,500 to 14,900 sqm
Rental/sq.m/day: RMB 6.0-7.0
Total Floors: 10
Metro: 12 minutes’ walk to Metro Lines #2, 10 (Hongqiao Railway Station)
Location: Minhang
Availability: Various options available
LifestyleThe intense pace of modern day life has made urban white-collar workers extremely conscious of their time. Every process and action is streamlined to remove any unnecessary steps and eliminate wasted time. This attitude is also influencing how we shop.
Shanghai has recently seen the emergence of the unattended convenience store concept with some convenience stores requiring consumers to scan a QR code before getting access to the entirely unmanned store. Xing Bian Li” (New Convenience) has decided to adapt this concept for office spaces. Open shelves and refrigerators stocking food and beverages located in offices, entrance halls and break areas can be purchased using a mobile phone.
A second approach to the unmanned convenience store concept is provided by Nabar. Here hot and cold food and beverages are selected from vending-style machines with payment being automatically taken using the mobile payment system when the customer leaves the store. This seemingly science-fiction experience is now available in Shanghai at Jinmao Tower.
Dining De Carbon Bar is a restaurant committed to the art of charcoal broiling. Their succulent specialty chicken wings may look somewhat overcooked, but looks can be deceptive. This is the result of lengthy amounts of time spent smoking in the specialist wood fire pits that lead to an exquisitely crispy outside and a moist, tender inside. Aromatic, soft and delightfully chewy.
De Carbon Bar is an impressively large, open space. There are welcome notes of pomp for those just finishing work and in need of a fine cocktail. The food might be more the kind of fare you might expect to find in some small BBQ place in Korea, but given how good it tastes, that is certainly a compliment. It's great to see a traditional owner break from the usual constraints of fine-dining, while still offering something upmarket
Market NotesIn major office moves, Medtronic has rented 15,000 sqm in New Bund World Trade Centre, while Philips relocated to Shibei Zhihuiyuan.
If we look at future supply for Q4 2017-2018, the emerging areas are still the main developing districts. Xuhui Riverside at 533,700 sqm and Pudong Qiantan at 475,100 sqm, are the largest areas of new supply, representing 25% and 22% of new supply respectively. New buildings include CES Westbund Center, Dream Center, Longhua International Center in Xuhui Riverside, Crystal Plaza Phase 2, New Bund World and Trade Centre Phase 3 in Pudong Qiantan.
Considering the new opportunities coming to the market some buildings are seeing the need for renovation in order to keep existing tenants, e.g. World Trade Tower, and Manpo International Plaza who completed renovations this year. Besides renovating public areas and facilities, they added more advanced equipment, such as a PM 2.5 filter system, Tesla chargers, and were awarded LEED International Golden Award Certification.
Shanghai Office Occupancy in Percentage
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2
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10
12
14
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Hongqiao ZhongShan Park
Xujiahui Shanghai Railway Station
Grade A Office in Putuo District
Huaihai Road
JingAn Temple and
West Nanjing Road
People Square
North Bund Lujiazui Century Avenue
Office Building Rental Rates by CBD Area: CNY / sqm / day
Hongqiao ZhongShanPark
Xujiahui ShanghaiRailwayStation
Grade AOffice in
PutuoDistrict
HuaihaiRoad
JingAnTemple
and WestNanjing
Road
PeopleSquare
North Bund Lujiazui CenturyAvenue
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Hongqiao ZhongShan Park
Xujiahui Shanghai Railway Station
Grade A Office in Putuo District
Huaihai Road
JingAn Temple and
West Nanjing Road
People Square
North Bund Lujiazui Century Avenue
Shanghai Office Occupancy in Percentage
Hongqiao ZhongShanPark
Xujiahui ShanghaiRailwayStation
Grade AOffice in
PutuoDistrict
HuaihaiRoad
JingAnTemple
and WestNanjing
Road
PeopleSquare
North Bund Lujiazui CenturyAvenue
Office Building Rental Rates by CBD Area: CNY / sqm / day
EventsMozart, L’opera Rock is coming to Shanghai Culture Square in January. This French musical features both original pop-rock compositions and existing music composed by Mozart to retell the life of the famous composer.
For those in search of more than pure entertainment, Mitch Albom’s Tuesday with Morrie is an emotional rollercoaster taking the audience on a ride of joys and laughter, tears and sadness. An inspiring, true story coming to Meiqi Grand Theatre from January 5th to 7th.
Known as ‘the bird of good fortune’, the crested ibis represents joy and elegance. Dance drama: Zhuhuan, starring Zhu Jiejing in the lead role, displays all of the grace, subtlety and beauty of the crested ibis. Coming to Shanghai International Dance Center on 13th December.
Musical West Side Story will be hosted by Shanghai Culture Square from Nov.23 to Dec.6, 2017. Featuring a host of classic songs, West Side Story stands unchallenged as the No. 1 of American musical theatre – daring, realistic, and as relevant as on the day of its premiere.
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Our consultants will be delighted to personally assist you at any time. You may call our main Shanghai office number, (86 21) 6230 1919, or contact directly a consultant who handles your specific concern:
NAI Sofia Group ShanghaiYour Shanghai office, industrial and retail property specialists
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Mandarin 86 21 6230 1919 x 808
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Mr. Alex Dinglanguages: English, Mandarin
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