Shanghai and Beijing, the two cities with Asia’s fastest-growing office rents, are set to lead a surge in commercial property transactions in China as more developers sell assets to raise cash for housing projects.
Sales of office and retail buildings in the two major Chinese cities will double this year to $10.4 billion (€7.9bn), according to Cushman & Wakefield, which doesn’t make nationwide projections.
The number of deals being negotiated in Shanghai in the past six months rose 50% from a year earlier, Jones Lang LaSalle Inc said.
Chinese real estate companies are selling commercial buildings for funds to complete apartment projects after the government’s two-year effort to curb home prices tightened credit. The cash ratio, a measure of liquidity for developers, fell to the lowest since 2008 as of December, according to data on 146 listed builders in China and Hong Kong compiled by Bloomberg.
“Many Chinese developers today are more willing to sell their office buildings or retail space because they need to access capital for their residential projects,” said Jack Ye, Shanghai-based national director of investment at Cushman, the world’s biggest closely held property service company.
Builders are opting to sell commercial developments because offering residential projects is difficult amid the curbs, Ye said. The government has imposed limits on how many apartments can be owned, as well as increased mortgage and down-payment requirements.
China’s home sales fell 18% from January to March, the first quarterly drop since the government changed its methodology for property data in February 2011. Home prices in April fell 0.3% from March to a 14-month low, SouFun Holdings, the nation’s biggest real estate website owner, said yesterday.
Greentown China Holdings Ltd said on April 17 it will sell a Shanghai project including loans for 2.1 billion yuan (€253m) to Soho China Ltd to improve its cash flow.
CapitaMalls Asia, the retail property unit of Southeast Asia’s largest developer, bought a 39,500 square-meter (425,174 square-foot) commercial site in Beijing from a subsidiary of Poly Real Estate Group Co, the Guangzhou, southern China-based developer whose first-quarter net income fell 24%.
Profit margins and cash flow at smaller local and regional developers have been hurt by government efforts to cool down the housing market.
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