China Commercial Real Estate Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

China Commercial Real Estate Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

The China Commercial Real Estate Market is anticipated to register a CAGR of more than 6% over the forecast period.

• COVID-19 had a significant impact on China's commercial real estate market. This is due to a high level of vacancy rates in offices and shopping malls in major cities such as Beijing, Shanghai, Guangzhou, and Shenzhen. Additionally, the slowing economy has led to a decline in demand for offices and shopping malls followed by a drop in customer flows has impacted the shopping mall rental charges. It is estimated that China's economy will normalize in 2022, with a GDP growth of roughly 5% Y-o-Y. Counter-cyclical policies and structural transformations are being implemented to ensure sustained growth.
• For the office market, it is estimated that nationwide net absorption will reach 6.2 million square meters in 2022, well above the five-year average of 5.3 million square meters. Technology and finance sectors are expected to continue being the primary drivers of office demand.
• Logistics net absorption is estimated to exceed 6 million square meters for the second year in a row in 2022 due to the increase in space take-up by e-commerce comaies, third-party logistics expansion, and the introduction of the Regional Comprehensive Economic Partnership (RCEP) scheme. Further, more cities in China are expected to shift to a balanced or landlord-favourable markets.

With a growing requirement for technology adoption, Chinese real estate companies are using a variety of innovative approaches to improve their technical skills while remaining competitive. Additionally, some prominent Chinese commercial real estate developers have partnered with internet and tech giants such as Alibaba, Tencent, JD, and Huawei to increase the adoption of property technology for efficient business operations. These developers can take advantage of the R&D capabilities of the tech companies while sharing business insights and giving physical space and financial resources as part of the partnership.

Chinese consumers' preferences are driving China's innovation in real estate. China has emerged as a major player in many digital technologies, particularly in consumer-facing industries and Fintech. In terms of the number of unicorns and valuations, China's property technology market is catching up to that of United States. Moreover, 75% of property technology start-ups are located in Beijing, Shanghai, Shenzhen, and Hangzhou.

Companies in Tier 1 cities are more likely to be early adopters of property technology solutions. These customers are associated with the brand, the quality of the product, the level of service, and personalized engagement. Customers will begin to demand omnichannel options and experiences as Alibaba's Hema and other similar retail innovations become more prevalent.

Property technology start-ups with data on customers, properties, sales, and business operations will be able to use it to build new product offerings and assist businesses with decision-making. Chinese start-ups may lead the world in consumer-facing property technology, physical retail innovation, and 5G-related applications.

As of 2021, in China, the sectors with the most unicorns were technology and telecommunications, transportation and logistics, and the finance or insurance sector. Chinese unicorns in the finance or insurance sector have a significantly higher market valuation than the start-ups from other sectors.

Currently, China has 4,762 national-level little giant companies and over 40,000 provincial-level little giant firms. More than 300 little giant companies, such as XGIMI, are already listed on various exchanges. Even during the COVID-19 pandemic, they maintained a positive growth rate and relatively high capital expenditure, demonstrating that such companies were less affected by the pandemic while continuing to grow rapidly.

The Ministry of Industry and Information Technology announced in March 2022 that it would support the incubation of an additional 3,000 little giant companies this year. China aims to create 10,000 little giant companies and 1,000 single-product champion enterprises by 2025. By that time, similar companies are expected to be contributing to innovations and providing momentum to China's future economic growth.

The Chinese commercial real estate market is slightly fragmented with the presence of a large number of players. Some of the major players include Wanda Group, GreenLand Group, Seazen, and CapitalLand. The market is characterized by the presence of large players and emerging players in the market. At the same time, players in the residential real estate market are also diversifying to invest in the commercial real estate market in China. Foreign investment has increased in the market, owing to which foreign players are also entering the competitive scene.

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