Bloomberg News

CBRE Plans to Invest in Chinese Office Market Even as Rents Slow

June 20, 2013

CBRE Global Investors, which manages more than $90 billion of property assets, is seeking to invest in offices in China as foreign companies expand in the country, even as rents fell in some cities amid oversupply.

CBRE Global is looking at office projects in Beijing, Shanghai, Guangzhou, and in as many as 10 second-tier cities, including Chengdu, Wuhan, and Suzhou, the fund’s Greater China Country Manager Richard van den Berg said at a conference in Hong Kong yesterday.

CBRE Global is planning to add to its investment in a Shanghai tower, its only current office project in China, van den Berg said. Prime office rents in the country fell an average 2 percent in the first quarter from three months earlier to 337 yuan ($55) per square meter per month, the first decline since the third quarter of 2009, according to Chicago-based commercial realtor Jones Lang LaSalle Inc. (JLL:US)

The fund would consider investing in cities with at least 2 million square meters (21.5 million square feet) of “investment-grade office space,” said van den Berg. The cities must also have demand for space from international companies and tenants whose businesses are based outside the cities’ boundaries, he said.

“Although second-tier cities are rapidly developing their office markets, many still don’t meet our criteria,” he said.

CBRE Global Investors acquired a majority of ING Groep NV’s real estate investment business in 2011. The company managed about $3.7 billion of assets in the Asia-Pacific region as of the end of the first quarter, according to its website.

No Bubble

Home prices in major Chinese cities rose at the fastest pace in more than two years in May, defying the govenrment’s three-year campaign to cool the real estate market. The country will widen property tax trials, which have only been introduced in Shanghai and Chongqing, the State Council said in a May 24 statement.

While there is no bubble in China’s real estate market, there are some cities with oversupply of new properties that are clearly overpriced, van den Berg said.

“Fundamentals are still very favorable in many sub-markets,” he said. “With the market corrections having taken place over the past few years, they now offer very interesting investment conditions especially for mixed use developments.”

CBRE expects 2013 and 2014 is “a good time” to invest in China’s property market as it slows due to the government’s tightening policies, van den Berg said in an interview in April last year.

Its partners in China have included Longfor Properties Co., controlled by the nation’s third-richest woman Wu Yajun, and China Vanke Co. (000002), the country’s largest developer by market value.

To contact the reporter on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net


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