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Expert: Shanghai commercial realty market set to warm up

By Wang Ying (chinadaily.com.cn)
Updated: 2009-03-06 16:56

After seven months of languid transaction pace, Shanghai's commercial property market is primed for a wave of deals, although the turnover will see a sizable drop from the same period last year, according to a report from property consultancy DTZ.

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Jim Yip, director of the investment department at DTZ Shanghai, said in the report that since last September, no deal of entire-bloc commercial property has been signed in Shanghai due largely to drying credit and bruised market confidence.

However, Yip expects to see a transaction rebound this month.

"The Chinese government has made it clear to the public that they will take effective measures to combat the economic downturn. As one of the few nations that register a positive growth rate and robust economy endorsed by the central government, China remains a lucrative destination for overseas investors," Yip said.

According to the report, investors moving back into the property market will take a more prudent attitude. They may separate portfolios to avoid risks and plunge more money into high-return big cities. They will also be more fastidious in choosing projects.

DTZ predicts transactions in the commercial property market could exceed 5 billion yuan this year, a free fall from last year's 15 billion yuan. "Single megabuck deals won't appear this year," added Yip.

Different price expectations between buyers and sellers have put the market in a deadlock: Potential investors intend to wait for the market to bottom out so they can purchase properties at the lowest price; while property owners refuse to recede into deeper discounts, the report said.

Yip noted China's commercial property investment in the next three to five years will still be full of opportunities. "The market needs to cultivate local institutional investors, as the financial crisis has weakened many overseas financial institutions' investment ability," he said.