SHANGHAI: The central government's curbs on foreign investment in the real
estate sector have yet to dampen institutional investors' ardour for purchasing
properties in Shanghai, according to industry experts.
Singapore-based Ascendas, a leading business space provider in Asia, has
already signed a contract to purchase Ocean Towers, a high-end office block in
downtown Shanghai, at a price ranging from 160 million yuan (US$20.3 million) to
180 million yuan (US$22.8 million), according to top real estate firm Jones Lang
LaSalle.
"Though several negotiations were on hold as overseas institutional investors
reworked their investment strategies, on the whole, foreign institutional
players remain greatly interested in participating in China's economic growth as
long-term property investors," said Kenny Ho, associate director of the research
department at Jones Lang LaSalle's Shanghai office.
As the latest report from Jones Lang LaSalle indicates, at least 16
properties, mainly offices and residential buildings, have been snapped up by
foreign investors in the first three quarters of this year, with the total
trading price estimated to exceed 8 billion yuan (US$1 billion).
Ho said he was confident that there would be 20 such deals this year double
last year's figure.
Most of the buyers are powerful international investors such as Morgan
Stanley and Citigroup. Morgan Stanley and associates have reportedly acquired
East Ocean Plaza from Zhejiang Greentown Group, a domestic property developer,
for 245 million yuan (US$31 million).
Meanwhile, Citigroup Property Investor entered into a joint-venture
redevelopment of historical homes in the lanes of Jianyeli in downtown Shanghai,
while a separate division of Citigroup paid 65 million yuan (US$8.2 million) to
acquire a 38,000 square-metre office portion of the Daning Life Hub project
Unlike last year, foreign institutional investors are purchasing properties
other than offices and high-end residential buildings. "That's mainly because
the price of offices and residential buildings is extremely high in Shanghai, so
investment in these two types of properties can bring fewer returns than
before," said Terence Tang, an investment expert at Jones Lang LaSalle.
Office rents have risen dramatically in Shanghai, with office space now at a
premium in the city.
Although it has yet to be completed, all available office space at Plaza 66,
a high-end development on West Nanjing Road, has been snapped up.
Daily rents are expected to reach US$1.4 to US$1.6 per square metre.
Demand for luxury residential apartments remains strong, as seen by the
robust sales of a number of new projects in the third quarter. Jing'an Four
Seasons sold out all 192 available units within one month, at an average price
of over 30,000 yuan (US$3,797) per square metre. Meanwhile, Lakeville Regency
sold another 70 units in the third quarter, at an average price of 53,000 yuan
(US$6,709) per square metre.