The link above will take you to a fact-packed 64-pager from JLL that dives deeply into the current state of affairs in and prospects for the major property investment sectors in China. They turn over each of the retail, logistics, office and hotel markets and, notwithstanding their obviously partisan position, reach a series of very uplifting conclusions.
Logistics. China has 30m sqm of quality logistics infrastructure, which is around as much as you’ll find presently in southern California. The US in total has 155m sqm. The upside is clearly huge.
Offices. Some overbuilding in smaller cities maybe but China’s stock of Grade-A space is now 32m sqm compared to forecast 2025 demand of 80m sqm. The US has a total today of 152m sqm. ‘Nuff said.
Shopping malls. There’s 83m sqm of these in China but only 10~15% are up to international standards. China has 235 sqm of mall space per 1,000 population compared with Americas 1,500. So much more to go for.
Hotels. The high end is being hit by anti corruption measures but mid-scale and select-service sectors are still under penetrated offering opportunity. High end distress might also lead to attractive purchase options in the next few years.
The survey also usefully reclassifies China’s cities into much more meaningful groups than the somewhat sloppy Tier-1, Tier-2 etcetera groupings. Instead JLL talk of the ‘Alpha’ cities of Shanghai and Beijing, now truly world class metropolises. Then there’s the Tier-1 cities of Guangdong and Shenzhen. Then come nine Tier-1.5 conurbations followed by the Tier-2s followed by three types of Tier-3, the growth bunch, the emerging crowd and finally the early adopters.
I’ll leave the almost last word of this summary to the study’s authors ‘China60 [The 60-most important cities in China] is projected to be responsible for 15% of global growth over the next decade, adding the equivalent of India’s entire current annual output (or two Germanys), to reach a combined size U$15.5 trillion by 2025. Despite a lower economic growth environment in recent years, the China60 will remain among the fastest-growing economies worldwide. By 2025, the economy of the China60 is expected to be almost twice the size of Russia and Brazil combined’.
Please try to at least flick through the report; I found it an excellent pick-me-up after last week which was, shall we say, somewhat testing.
Happy Sunday