Share: Share on Facebook Share on Twitter Share on LinkedIn I recommend visiting to read:%0A%0A {0} %0A%0A {1}

Francis Li & Queeny So: Assessing the Greater Bay Area Real Estate Investment Landscape

James Shepherd • 20/05/2021

Francis Li & Queeny So: Assessing the Greater Bay Area Real Estate Investment Landscape

James Shepherd • 20/05/2021

James Shepherd recently sat down with Capital Markets leaders Francis Li and Queeny So to discuss where investors are seeing opportunity for growth across the Greater Bay Area’s commercial real estate markets.


James Shepherd: We see many foreign investors opting for Shanghai and Beijing as their first mainland China destination for capital deployment. Do you think more investors will now turn their attention to the cities within the Greater Bay Area (GBA)? And for foreign investors active in China, what sort of capital weighting to the GBA might we see in the years ahead? 

Francis Li: Shanghai and Beijing have been increasingly opening up to foreign investors since the year 2000. There is therefore a lot of investable stock available, and these cities are by far the two largest Chinese markets. However, the GBA area has been catching up in the last 10-15 years, especially Shenzhen, in terms of investable stock.  

In Guangzhou and Shenzhen, there are many SMEs looking to acquire their own facilities, representing strong end-user demand. And the raft of favorable new policies in place will likely help spur a growing number of international investors chasing assets in the GBA. In my opinion, investors should weight around 20% to 25% of their China investment into the GBA. 

James Shepherd: Regarding Hong Kong, there have been some significant corrections in rental pricing and asset pricing, and we’ve seen many overseas investors demonstrate extreme caution. Do you feel Hong Kong is now on the road to recovery? Are attractive buying opportunities starting to emerge, and where will these be? 

Francis Li: We are seeing investors taking up industrial properties in Hong Kong, especially logistics properties and stabilized industrial buildings. These types of property usually require a lower capital commitment, ranging from HK$500 million to HK$1 billion, with relatively reasonable unit prices. This means investors can achieve relatively higher cap rates for industrial properties, in the range of 3.5% to 4%.  

With the Hong Kong – Singapore travel bubble about to launch, and planned loosening of travel restrictions with mainland China, we expect to see a gradual renewal of investment activities in other sectors such as office and retail, as the market starts to recover.  

James Shepherd: Regarding Shenzhen, supply is often a concern for investors. Will the emphasis on development of the GBA attract sufficient business interest to absorb the huge office supply we’re currently seeing in Shenzhen? 

Queeny So: The momentum for Shenzhen’s continued growth into the future is built on a foundation of three factors. Firstly, an uninterrupted trend of younger people moving into the city, growing on average at around 400-500,000 people a year.  

Secondly, a focus on innovation. Investment in R&D already represents a 5% share of contribution to the city's GDP, and Shenzhen’s goal is to be a technological and industrial innovation hub with global influence.  

Finally, Shenzhen benefits from the dual zone planning between the mainland and Hong Kong. Under China’s 14th Five-Year Plan, the GBA will support Shenzhen to build a pilot demonstration zone, deepen high-level mutually beneficial cooperation between Guangdong, Hong Kong and Macau; and become the main engine for the growth of the Greater Bay Area. 

James Shepherd: Regarding Guangzhou, I’ve heard repeatedly that it can be really challenging to find quality opportunities in Guangzhou. What sectors or locations in the city would be most attractive to investors? 

Queeny So: In Guangzhou, investors favor high-quality assets located in the core area. However, due to market trading habits, the majority of properties in the core areas have non-holistic property rights, and the assets available for bulk transactions are limited.  

Procedures for investigating and internally reviewing projects for foreign investors can also be lengthy and cumbersome, a major reason for them to miss high-quality assets. Therefore, seeking high-quality investment properties in Guangzhou is still quite challenging. 

Among asset categories, office buildings and retail properties are still the two most popular with investors. Since the effective containment of COVID-19 domestically, the commercial real estate market in Guangzhou has been booming. Investors' confidence in the market has recovered rapidly, and demand for office buildings, retail markets and overall property investment assets has increased significantly. The vacancy rate for Grade A office buildings in Guangzhou is at just 9.3%. In the first quarter of 2021 net absorption reached 195,000 sq m, pushed along by strong demand from the TMT, financial and professional services sectors.  

That’s been the strongest Q1 performance of the past few years, and more than twice the full-year absorption of 2020. Investors may pay most attention to office properties located in the core areas such as Zhujiang New Town and Pazhou. These districts have bright development prospects and most of the projects have stable cash flow income. 

In terms of retail assets, Guangzhou’s local consumption power is strong, and large-scale retail transactions have been relatively numerous. Large-scale deals have been completed by players such as CapitaLand, Xicheng Metropolis and Lefeng Plaza in recent years. Investors can explore opportunities with properties in Yuexiu District with potential for repositioning or upgrading and transformation.  

Surrounding areas such as the Huangpu Lingang Economic Zone’s industrial parks and logistics projects are also attracting greater investor attention, and this is emerging as a distinct new trend in the Guangzhou investment market. 

James Shepherd: Outside Hong Kong, Shenzhen and Guangzhou, which GBA markets are attracting most investor attention right now? What are your recommendations for investors seeking to deploy capital in the GBA and can you give us your tips on what’s hot and what’s not? 

Queeny So: Each city in the Greater Bay Area has its own unique advantages, and this is actually one of the core competitive factors of the GBA. In addition to Guangzhou, Shenzhen and Hong Kong, we believe that many second- and third-tier cities in the GBA also have great potential. 

For example, Foshan is the third largest city in Guangdong, and the spending power of local residents is equal to that of Guangzhou and Shenzhen. The city’s growing catering sector and retail markets have begun to attract investors' attention.  

In 2020, we facilitated the transaction of a mall in Mapletree Foshan. The buyer, China Overseas Land Development, has been cultivating the Foshan market for many years. They are strong proponents of Foshan's commercial environment and believe that the city’s market has further growth potential. Factors such as this mean we believe that the outlook for Foshan's commercial real estate market is positive, and investors can continue to explore the market.  

Dongguan and Huizhou are the two cities closest to Shenzhen and Hong Kong. Many technology and financial companies still have growing needs for data center facilities, but Guangzhou and Shenzhen’s policies around data centers have become increasingly restrictive and the cost of self-operated or self-leased facilities in Hong Kong has been high for a long time.  

As a result, these two cities have become the focus of data center development in the Greater Bay Area. Many local developers in the GBA have progressively assembled their own data center teams. For example, Keppel purchased a Huizhou data center project from Country Garden last year, which indicates to us that Huizhou's data center market has indeed begun to attract attention. 

Zhuhai is also a bright spot in the Greater Bay Area. The Hengqin Free Trade Zone is regarded as the next "Shenzhen Qianhai," and backed by robust policy support. In addition, Zhuhai is a traditional tourism destination in the Bay Area, adjacent to and supported by Macau. Hong Kong and Macao developers with a strong sense of opportunity have already begun to grab seashore locations. In Hengqin, projects from developers such as Xinde Group and Lai Sun Group have become landmarks in the port area and cultural tourism areas. 

In addition, the Greater Bay Area is a very strong draw for logistics sector investors. Renewed economic growth coupled with dense population centers is driving significant expansion in demand for logistics services. The U.S. real estate firm Hines entered the China logistics market last year, with a project in Dongguan. We think this is indicative of how strongly sought after logistics projects in the Greater Bay Area are going to become. 

For more on how Cushman & Wakefield can support our investment ambitions across the Greater Bay Area, get in touch with James, Queeny, or Francis through their profiles above. 

Related insights

APAC Capital Markets Overview
Insights • Investment / Capital Markets

Asia Pacific Capital Markets Overview - Spotlight on India

As Asia Pacific begins to show signs of recovery from COVID-19, led by a rebound originating from China, what is the current status of the commercial real estate market and where is it headed?
Anna Town • 03/03/2021
What’s Next for the China CRE Investment Market
Insights • Investment / Capital Markets

What’s next for China’s CRE Investment Market Spotlight on Shenzhen : 2020 Review & 2021 Outlook

As China emerges from the COVID-19 outbreak ahead of other major global economies, what’s the current status of the country’s commercial real estate (CRE) market and where is it headed?
James Shepherd • 20/01/2021
Insights • Investment / Capital Markets

Q2 Asia Pacific Capital Markets Webinar - Spotlight on Seoul

As Asia Pacific begins to show signs of recovery from COVID-19, led by a rebound originating from China in Q2, what is the current status of the commercial real estate market and where is it headed?

James Shepherd • 22/07/2020
With your permission we and our partners would like to use cookies in order to access and record information and process personal data, such as unique identifiers and standard information sent by a device to ensure our website performs as expected, to develop and improve our products, and for advertising and insight purposes.

Alternatively click on More Options and select your preferences before providing or refusing consent. Some processing of your personal data may not require your consent, but you have a right to object to such processing.

You can change your preferences at any time by returning to this site or clicking on Privacy & Cookies.
These cookies ensure that our website performs as expected,for example website traffic load is balanced across our servers to prevent our website from crashing during particularly high usage.
These cookies allow our website to remember choices you make (such as your user name, language or the region you are in) and provide enhanced features. These cookies do not gather any information about you that could be used for advertising or remember where you have been on the internet.
These cookies allow us to work with our marketing partners to understand which ads or links you have clicked on before arriving on our website or to help us make our advertising more relevant to you.
Agree All
Reject All