Looking back at past crises, the impact of SARS in 2003 was not prolonged, as China’s economy was in a period of rapid growth, and, although the global financial crisis of 2008 took a toll on the global economy, with a fire sale of assets in many countries, China's real estate market rebounded rapidly afterwards due to high liquidity in real estate projects and a healthy financial market.
With the COVID-19 outbreak, now officially classified by the World Health Organization as a pandemic, investors are showing mixed attitudes towards the market. Business activities have slowed, impacted by the pandemic, and yet a plot of land in Xuhui Riverside Area in Shanghai recently sold for a record high RMB31.05 billion.
Against this backdrop, in February 2020 the Cushman & Wakefield Capital Markets team launched a mainland China investor intentions survey. The survey took the form of one-to-one interviews, with senior management of the most active investment institutions in mainland China over the last three years invited to participate. The project accumulated 122 valid survey completions and analyzed them to provide investors in commercial real estate (CRE) and other sectors with timely market intelligence.
The survey results demonstrate significant market confidence. More than 60% of respondents believe that investment activities will rebound within six months post-COVID-19, and 99% of respondents express their willingness to continue investing in mainland China after the pandemic. In terms of investment in cities, investors are more enthusiastic about Tier 1 cities, especially foreign investors, with 100% of respondents from foreign institutions stating they have plans to invest in Shanghai in the next 12 months. Despite the impact of the pandemic most investors have confidence in the market and are optimistic about the long-term development of the CRE market in mainland China.
Today, most investors have become accustomed to turbulence. The straight rise in asset values over the past few years has kept investors waiting for new market entry opportunities should a correction arise. With the China government’s concerted effort to control the coronavirus, and with the support of economic stimulus measures, we are hopeful that its impact will only be short-term. Experienced investors may find this an opportunity to expand their footprint in China, and to achieve long-term growth.
