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31/05/2011

 Workplace investment on the rise

 
While property investment on the mainland cooled sharply in the first quarter, as a result of government measures and the effect of Lunar New Year holidays, investment in the office market continued to grow at a brisk pace, DTZ says.
 
According to a report by the research firm, investment in mainland property dropped 64.4 per cent to US$20.6 billion from the fourth-quarter of last year.
 
Of the total, residential market investment fell 70.1 per cent to US$8.02 billion, but office market investment rose 16.6 per cent to US$1.67 billion.
 
Other sectors of the property market covered by the report include industrial, retails, mixed used, and others.
 
The majority of deals were in prime office buildings rather than land. Office building deals reached US$1.02 billion from US$768 million, up 32.9 per cent on a quarter-to-quarter basis.
 
The research firm says restricting residential purchase had severely affected the residential investment market during the first quarter, and developers have also become cautious on residential developments.
 
The office investment market is expected to continue to grow throughout this year. Apart from investments moving from the residential sector, the office market will continue to be driven by positive market outlook, solid occupier demand and potential rental growth, says David Ji, head of Greater China research at DTZ.
 
Ji says office investments are mainly focused on first-tier and major second-tier cities, with mature business environments, and most were prime offices in major locations.
 
While there are suggestions that investment in prime offices in cities such as Beijing and Shanghai has become less attractive due to high rents, Ji believes they will continue to grow this year due to the lack of supply in prime districts, especially those available for investors. "Rental yield, potential capital gain, and potential rental growth are still the key considerations of investing office properties," he adds.
 
Ji says all first-tier cities still offer great opportunities for investment because they have solid occupier demand and greater potential on rental growth, while major second-tier cities, such as Chengdu, also provide good opportunities because of strong rental growth potential.

SOURCE: SCMP



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