Mainland property agency firm Centaline Property (China) said that there is an ascending trend for institutional foreign investors moving into the mainland commercial property sectors.

The company's director and deputy general manager, Dickson Wong, predicted the influx of capital will buoy the Grade-A offices in major mainland cities such as Shenzhen.

He believes that the average rent of Shenzhen Grade-A offices will rise 10 percent this year, while their average return yield will shoot as high as 8 percent, up from 6.4 percent earlier this year.

Liu Yuan, the company's senior manager of China research center, said foreign buyers are no longer fanatically chasing residential properties with the mandate that limits foreign residents to buy no more than one flat on the mainland.

He said that the policy mostly affected individual foreign homebuyers. "The number of individual buyers has obviously dropped 50 percent in Beijing and Shenzhen in recent years," he said.

However, Liu said that institutional foreign investors are immune to the restriction, noting their trades remain active, especially in commercial sectors.

"Foreign funds could use various channels to invest in the market, holding stakes of mainland-registered developers, for example," he said.

Regarding the Shenzhen commercial property market, Wong said that the sector has been resilient.

"The city's commercial property market has long lagged behind its residential market, but the shift of foreign investment will spur the former," he said.

According to a report by Centaline Property, the average monthly rent of Shenzhen Grade-A offices grew from 120 yuan per square meter in early 2006 to more than 160 yuan per square meter in the first quarter of this year.

"We believe the average rent will increase 10 percent throughout 2008," he said.

Nevertheless, Wong said that most of the foreign funds prefer to choose Beijing, Shanghai and some second-tier cities as their top priority.

"The return yield of the commercial buildings in Beijing and Shanghai is relatively higher, and the base of the second-tier cities is low. Hence, these cities will harbor most of the whole-block commercial transactions in the short run," Wong forecasted.

(HK Edition 06/04/2008 page2)