Shanghai Sees Active Foreign Property Investors

Different from last years bulk market of Shanghai， foreign investors made an impressive return this year. Most of the bulk deals in the first half of 2013 are made by foreign companies， with the proportion and volume much higher than Chinese local companies.

Thanks to the increasingly active foreign investors， the market of office buildings in Shanghai rejuvenated. According to the governmental data， more than a dozen of deals were completed in the commercial property market of Shanghai in the first half of 2013， with the trade volume of around RMB 17 billion， much higher than the same period of last year.

The Huge Trade Volume

On July 8， 2013， U.S.-based Colliers International， the second largest property company in the world， held a press conference in Shanghai to review its activities in the real estate market of Shanghai in the first half of 2013. In the meeting， the insiders from Collier China said that Collier still earned profits from leasing first-class office buildings in Shanghai， which started to increase from the first quarter of this year.

Another piece of important infor- mation revealed in the conference was that the investment in the commercial property market kept its vitality and most foreign investors considered the office buildings and retail sites in Shang- hai as good investment opportunities.

In the first half of 2013， there were 7-8 commercial real estate deals made in Shanghai in the first half of 2013. In January 2013， ARA Assets Management Corp took over the Marine Mansion at the intersection of East Yanan Road and Middle Zhejiang Road from Singapore-based Ascendas Group through offshore equity trade. The total deal volume amounted to RMB 1.9 billion， while Ascendas Group bought this building with RMB 1.328 billion in 2006.

In April， Carlyle Group bought the Central Plaza on South Huangpi Road with RMB 1.67 billion from Fonterra Real Estate Group. This project is located in Peoples Square， the downtown in Shanghai. The price was originally estimated to be around RMB 1.813 billion.

East Sea Commercial Center， another building located in Peoples Square， was also very popular among foreign investors. In May， CLSA AsiaPacific Markets bought the second part of this project and a section of the first part at the price of RMB 33，000/sqm.

According to the public information， East Sea Commercial Center was designed by P-T Group， one of the world-leading architect firms. The first part was sold out after the completion. The second part was finished in 1997 with the total area of 50，000 sqm. The first four floors of this building， whose total area reached over 10，000 sqm are for business outlets while the rest floors， from fifth to 23rd， are set for offices.

Apart form the office buildings， the retail sites also saw two deals finished in the first half of 2013. Keppel Land China united with Alpha iPartners to spend RMB 3.3 billion acquiring 80% of the shares of Jinqiao International Commercial Square in the first quarter of 2013， while a subsidiary company of New World Department Store spent RMB 1.25 billion acquiring Hongxin Fashion Square.

The Return of Foreign Investors

As seen in the previous paragraphs， most of the big deals were made by foreign investors， who injected the new power into the commercial property market of Shanghai.

Data from DTZ East Chinas Investment & Consultancy Service Center showed that 66% of the deal volume in Shanghais property market in the first half of 2013 was contributed by foreign investors， almost twice of the deal volume made by Chinese companies. Office buildings were still the most popular targets for investors as the capital put into them took 59% of the entire property market.

Ye Jiancheng， general manager of DTZ East Chinas Investment & Consultancy Service Center， said that foreign investors seemed to have restored their confidence in the Chinese property market. They favored highquality office buildings， which aroused the investment in commercial property. Meanwhile， the domestic property developers are actively setting up RMB funds. The insurance funds are also eager to be a strong player in the property market. Previously， there was a Chinese insurance company successfully buying a property sector in London.

In the future， RMB funds are more than the fundraising channel of property development projects. They will turn to the purchasing of built property projects.

Wang Bei， President of Property and Service Sector at Collier Internationals branch in East China and Southwest China， said that domestic investors were very active in the property market in 2012. But this year， the impetus was taken by foreign investors. “They did this because they were bullish on the Chinese domestic market，” he said. “The property market in China made a great change this year as investors and developers returned to the major cities. The higher demand for investment in those cities opened a great gate to foreign investors.”

The heat of office buildings in Shanghai also means that this city has a great demand of offices. Thanks to the well-developed facilities and financial services， Shanghai has become the paradise for both foreign and Chinese companies. Many banks， insurance companies， or even some small- and medium-sized enterprises have rented offices in Shanghai， to prepare for their expansion， or as a kind of investment.