China Commercial Real Estate Investment Market June 2020

China Commercial Real Estate Investment Market (June 2020)China Commercial Real Estate Investment Market (June 2020)CHINESE MAINLANDCHINESE MAINLAND KEYRetail property transactions accountedTable 3. Chinese Mainland Key TransactionsTRANSACTIONS – SECTOR BY NUMBERfor the largest share by number, onaverage of about 42% of major propertyFig 4. Breakdown of major property transactions in Chinese Mainlandby numbertransactions in the mainland marketover the past decade. Offices accountedfor about 33.3% and SACTIONSDateand office assets were not only relatedto the increase of their transactionnumber, but also resulted from theBuyerSellerDeal AmountRMB (Billion)Shanghai Port CityMixed-Use ProjectShanghaiOffice, RetailCapitaLand, GICSIPG12.801,000Apr 2019Shenzhen OCT Tower(60% of equity)ShenzhenOfficeChina LifeShenzhen OverseasChinese Town Co., Ltd.12.00500Jul 2019Greenland HuangpuRiversideShanghaiRetailBrookfield AMGreenland10.56Mar 2019Changtai PlazaShanghaiOffice, RetailBlackstoneCJ Group10.02Dec 2018Sanlitun Yingke CentreBeijingOffice, Retail,ApartmentChina VisonaryPartners Group, GawCapital10.50Feb 2019Kun Square,Great Bell TempleBeijingRetailByteDanceZK Investment9.00Nov 2019Shanghai MapletreeBusiness City & Vivo CityShanghaiOffice, RetailBlackstoneMapletree Investment8.25Feb 2020LG Twin TowerBeijingOfficeSingapore RECOChangan PrivateLtdLG Holdings8.04Dec 2019T2 Building, ChinaResources Qianhai PlazaShenzhenOfficeCITIC PrudentialLifeChina Resources LandQianhai Co., Ltd8.00RetailChina ResourcesLandTianjin UrbanInfrastructureConstructionInvestment Group7.93points and 14.1 percentage pointsYoY. The increasing share of retailProperty typeDec 2018In 2019, the share of retail property34% respectively, up 17.7 percentageCity1,500properties for about 16.24%.and office transactions was 41.8% 19Q1 2020Note: Data for transactions of USD 2.5 million or more from 2010 to Q1 2020Source：RCA, Knight Frank Researchdeclining proportion of industrialproperty transaction number. Thenumber of major property transactionIn 2019, industrial properties accounted34.2%, 41.8%, 17.2% and 6.3% of thehas fallen sharply in recent years asfor about 17.3% of total transactiontransaction number of office, retailmore investors or original ownersnumber, down about 24.5 percentageproperty, industrial property and hotelhave transferred assets in the form ofpoints YoY. In Q1 2020, the mainlandtransaction respectively.portfolios.real estate investment market recordedCHINESE MAINLAND BREAKDOWNBY FIRST-TIER CITIESJan 2019Tianjin GalaxyTianjinNote: The major property transaction amount is for the past 24 months and calculated in terms of the actual transaction valueThe order of the transaction list is sorted by transaction valueSource: RCA, Knight Frank ResearchFrom 2016 to 2019, excluding landtransactions, the share of majorproperty transaction value in Beijingand Guangzhou had grown, whilethose in Shanghai and Shenzhen hadFig 5. The share of major property transaction value in first-tirecities in 2016 and d. Beijing, in particular, had seenits share rising sharply, reversing the8.4%4.5%previous situation in which Shanghaiaccounted for more than half of the totaltransaction value.31.7%2016201956.4%44.6%42.6%Note: Data for transactions of USD 2.5 million or more in 2016 and 2019Source：RCA, Knight Frank Research1213

China Commercial Real Estate Investment Market (June 2020)China Commercial Real Estate Investment Market (June 2020)CHINESE MAINLAND BUYER PROFILECHINESE MAINLAND MAJOR SELLERSBy transaction value, privateTable 4. Chinese Mainland Major Sellersinvestors were the key buyers in theChinese Mainland market, but theirshare has been decreasing since2013.Fig 6. Buyer composition of major property transaction market inChinese MainlandPrivate Buyer12.8%In 2019, private investors accountedfor 39.4% of total major property3.3%26.0%11.8%3.9%19.1%REITS/Listed Company10.0%11.0%9.8%2.7%2.8%6.6%Institutional ing amountRMB(Billion)Number of ProjectsAverage PriceRMB(Billion)1HNA Group3215229.2%2SOHO China221425.8%3YMCI (China)222714Greenland Group213615Guangzhou Metro19366China Oceanwide Holdings15287Thaihot Group132318Shanghai Int’l Port Group13269CMIG1211210Partners Group1033Foreign Buyer14.0%5.2%15.8%4.0%20.2%25.9%26.7%transaction value, showing the35.1%decrease from 2018.41.9%45.0%33.9%40.8%33.9%The share of REITS/listed companiesin the past decade has been on the58.0%65.2%67.1%60.2%56.9%45.7%rise. In 2019, they accounted for37.8%38.4%46.9%39.4%31.0%40.8% of the total transaction value.In addition, the share of foreignbuyers has remained stable in the2010201120122013201420152016201720182019Q1 2020Note: Data for transactions of USD 2.5 million or more from 2010 to Q1 2020, excluding 'Other Buyer' in RCASource：RCA, Knight Frank Researchpast decade but peaked in 2019,reached around 15.8%, due to theforeign buyers, private buyers andmarket, while the institutionalweakening RMB exchange rate.REITS/listed companies accountedbuyers took up the least share.for a similar share of the ChineseIn Q1 2020, the transaction value ofCHINESE MAINL AND RELEVANTMainland major property transactionCHINESE MAINLAND SELLER PROFILEBy tra nsaction va lue, private a ndforeign sellers dominated t heChinese Ma inla nd ma rket duringt he 9 yea rs from 201 1 to 2018.Fig 7. Seller composition of major property transaction market inChinese MainlandPrivate SellerREITS/Listed CompanyInstitutional SellerForeign SellerHowever, in 2019, t he tra nsactionfor about 15.4%, a signif ica nt33.3%35.0%34.4%50.0%48.8%Table 5. Recent Relevant Policies on Real Estate Investment in Chinese Mainland first-tire %52.4%48.2%10.1%11.4%13.5%27.9%wea kening R M B excha nge 5.2%In 2019, private sellers accounted38.4%45.7%37.7%31.3%for about 38. 5% of t he tota ltra nsaction va lue, a nd R EITS/listedcompa nies accounted for 33%, t hela rgest sha re in t he pa st .1%201732.9%38.5%2018201925.9%Q1 2020Note: Data for transactions of USD 2.5 million or more from 2010 to Q1 2020, excluding 'Other Seller' in RCASource：RCA, Knight Frank ResearchInstitutiona l sellers accounted forIn Q1 2020, foreign sellerssellers each accounted for 25.9%about 8% of t he a nnua l tra nsactionaccounted for t he la rgest sha re ofrespectively.va lue in t he pa st decade, a nd 13.2%tra nsactions, at 48.2%, a nd R EITS/for 2019.listed compa nies a nd private142Recent Relevant Policies on Real Estate InvestmentThe Foreign Investment Law (March, 2019) provides better market conditions for foreign investors to invest in China.It is expected that foreign investors will maintain an advantageous position in major property investment and play anactive role in the Beijing market.On 2 August 2019, the Beijing Municipal Housing and Construction Commission issued a White Paper on Housingand Urban-Rural Construction Development in Beijing (2019), which aims to stabilise prices of land and housing andfirmly curb the demand for speculative housing investment.Several changes coming into effect on 1 September 2019 optimise the criteria for regional headquartersidentification, which enables more enterprises such as the Internet, digital and other emerging areas of light assetsenterprises comply with the regional headquarters recognition, enjoy financial subsidies and tax relief and otherpolicy preferences.1.7%10.5%drop of 26 percentage points YoY.This cha nge wa s related to t hePOLICIES15.4%va lue of foreign sellers accountedfor t he lowest sha re in t he decade,Note: The transaction amount is the total for the past 24 months, sorted by transaction amount from high to lowSource: RCA, Knight Frank ResearchShanghaiOn 6 August 2019, the State Council approved the establishment of a new area of China (Shanghai) Free Trade PilotZone, and launched a number of active policies aimed at forming international business, cross-border financialservices, cutting-edge technology research and development, cross-border service trade and other functions,including the advance industry intelligent network link and new energy vehicles.On Sep 12,2019, the municipal government put forward 26 concrete measures to propel foreign investment, aimingto broaden and deepen the scope of foreign investment. Notably, the stock, funds and Insurance markets havebeen opened up due to the widening or canceling of restrictions on the ratio of foreign equity.At the beginning of 2019, “The plan for key construction projects of 2019 in Guangzhou” was released. In terms of Urban Renewal and Land Readiness, Guangzhou plans to invest RMB31.1billion to propel 52 projects across 11 districts.Guangzhou Financial policy is generally loose, but residential mortgages and corporate financing restrictions have notbeen significantly relaxed. Since May 2019 housing enterprises continued to operate in the tightening financingenvironment, focusing on trust, foreign debt, development, loans and other areas.15

China Commercial Real Estate Investment Market (June 2020)CityChina Commercial Real Estate Investment Market (June 2020)Recent Relevant Policies on Real Estate InvestmentOn August 18, 2019, the Central Committee of the Communist Party of China and the State Council issued theOpinions on Supporting the Construction of the First Demonstration Zone of Socialism with Chinese Characteristics in Shenzhen. According to the Opinion, Shenzhen will be strategically positioned as a global benchmark citywith competitiveness, innovation and influence.ShenzhenThe Opinions support Shenzhen’s implementation of a more open and convenient management system forthe introduction and entry and exit of foreign talents, the promotion of interconnection with Hong Kong andMacau financial markets and mutual recognition of financial (fund) products, the first test in promoting theinternationalization of the RMB, and the exploration of innovative cross-border financial supervision. The policyaims to support Shenzhen to pilot the deepening of foreign exchange management reform, build free trade pilotzones with high standards and quality, and promote more international organizations and institutions to settle inShenzhen.In February 2020, the “Shenzhen 2020 Major Project Plan” was issued. In the plan, there are 122 projects forindustrial parks, production lines, and R & D center. Also, there are 48 urban renewal projects and 37 headquartersprojects.03.BEIJINGINVESTMENT MARKET1617

China Commercial Real Estate Investment Market (June 2020)China Commercial Real Estate Investment Market (June 2020)BEIJING ECONOMIC OVERVIEW103.821.54millionRMB746.2bn3.8% yoyBEIJING TRANSACTIONS – BYNUMBER OF DEALSRMB271.6bn6.6% yoy21.5% yoyIn the past ten years, the averagenumber of major property transactionsPermanent Population(end 2019)Gross Domestic Product(Q1 2020)Consumer Price Index(Q1 2020)in Beijing real estate investment marketTotal Retail SalesConsumer Goods(Q1 2020)has achieved 212 deals per year, withannual transaction number exceeding350 in each of the 2 years in 2010 andRMB653.9bnRMB19,3494.8% yoy87.6%4.8% yoy2016.7.1% yoyThere were 116 deals in 2019, whichwas lower than the average annualnumber in the past decade. However,Per Capita DisposableIncome (Urban)(Q1 2020)Added-value ofTertiary Industry(Q1 2020)Added-value of TertiaryIndustry as % GDP(Q1 2020)Cumulative Growth inFixed Asset Investment(Q1 2020)6.4% yoy4.3% yoyRMB502.9bnRMB122.4bnTransaction Number6004003472001421852573233557502010increased sharply by 105.6% YoY to RMB0.74 01933Q1 2020Note: Data for transactions of USD 2.5 million or more from 2010 to Q1 2020Source：RCA, Knight Frank ResearchIn Q1 2020, there were 33 major propertytransactions recorded in Beijing market,4.4% yoy8.4% yoyThe average transaction value per dealFig 9. Major property transactions in Beijing by numberwith average transaction volume RMB0.8 billion per deal.Real Estate Investment(Q1 2020)Foreign Direct Investment(2019)Value of Import(Q1 2020)Value of Export(Q1 2020)BEIJING TRANSACTIONS – SECTORSource: Official DataBY VALUEBEIJING TR ANSACTIONS – TOTALOffice transactions took the lead, withVALUEthe average annual transaction valueaccounting for more than half of the majorproperty transactions in Beijing over thepast decade, or about 50.3% on average.Retail properties came the second, whichIn the past decade, the annual majorproperty transactions in Beijing realestate investment market have reachedan average value of about RMB 48.6billion, with annual transaction valueachieved highest point at RMB 86billion in 2019.In Q1 2020, the transaction value formajor property was RMB 26 billion.Fig 10. Breakdown of major property transactions in Beijing by valuehad an average of about 35.4% of BeijingFig 8. Major property transactions in Beijing by valuemajor property transaction value in theTransaction Valuepast decade. Hotels ranked third, but theaverage share was less than 10%. Lastly, theRMB(Billion)average share of industrial properties 1618Apartment8060In 2019, office transactions accounted for2026accounted for about 32.2%, and theremaining types of property assets201720182019Q1 202002010201120122013201420152016Note: Data for transactions of USD 2.5 million or more from 2010 to Q1 2020Source：RCA, Knight Frank Researchoffice and retail property transactionswere recorded, with the transaction valueNote: Data for transactions of USD 2.5 million or more from 2010 to Q1 2020Source：RCA, Knight Frank ResearchHotel10040accounted for about 11%. In Q1 2020, only2010RetailRMB(Billion)apartments was less than 5%.transaction value, retail properties200Industrialabout 56.7% of the total major property3129Officeaccounting for about 87.7% and 12.3%,respectively.19201720182019Q1 2020

China Commercial Real Estate Investment Market (June 2020)China Commercial Real Estate Investment Market (June 2020)BEIJING TRANSACTIONS - SECTORBY NUMBERAfter 2016, more investors or originalproperty owners transacted Beijing realestate assets in the form of investmentFig 11. Breakdown of major property transactions in Beijing bynumberportfolio. The number of majorproperty transactions of five types ofproperty assets, including office, retailproperty, industrial property, hotel andapartment, declined significantly, butthe transaction share of all types ofassets did not fluctuate significantly.In 2019, office transactions accountedfor 47.4% of the total number of majorOfficeIndustrialRetailHotel66.7% of the total transaction number,BuyerSellerDeal AmountRMB (Billion)Jun 2018New EBA InvestmentsOfficePostal Savings Bank of ChinaEBA Investments4.00Mar 2019Glory Star Financial TowerOfficeMapletree InvestmentICBC InternationalHolding Co., Ltd3.40500400BEIJING BUYER PROFILE300200By transaction value, real estateinvestment market in Beijing used to be1000apartments for less than 10% each. In Q12020, office transactions accounted forProperty typeNote: The major property transaction amount is for the past 24 months and calculated in terms of the actual transaction valueThe order of the transaction list is sorted by transaction valueSource: RCA, Knight Frank ResearchApartmentdominated by REITS/ listed companiesproperty transactions in Beijing,retail properties for 43.1%, hotels and2ProjectDateand private investors. But since 2012,2010201120122013201420152016201720182019Q1 2020Note: Data for transactions of USD 2.5 million or more from 2010 to Q1 2020Source：RCA, Knight Frank Researchthe share of REITS/ listed companiesgradually increased. In 2019, REITS/Fig 12. Buyer composition of major property transaction marketin BeijingPrivate Buyer15.6%listed companies accounted for 32.6%of total investment value, while privatewhile retail properties for 33.3%.7.7%17.9%REITS/Listed 5%9.1%speculated that the shift was driven byTable 6. Key TransactionsBy the transaction value, in Q1, foreignBuyerSellerDeal AmountRMB (Billion)10.50Dec 2018Sanlitun Yingke CentreOffice, Retail,ApartmentChina VisionaryPartners Group, GawCapitalFeb 2019Kun Square, Great BellTempleRetailByteDanceZK Investment9.00Feb 2020LG Twin TowerOfficeSingapore RECO ChanganPrivate LtdLG Holdings8.04Mar 2019Dinghao Electronic BuildingOfficePartners Group, SDP Investment, Carlyle Group, MiddleEast Family Wealth FundSino Horizon7.50Oct 2019Zhongguancun TimesShopping PlazaRetailEBA InvestmentsGlorious Oriental6.80Oct 2019Ronsin Technology Center(85% of equity)Office, RetailAllianz Real Estate, Alpha AsiaD&J China6.60Aug 2019Pangu PlazaOfficeBBMGBeijing PangushiInvestment Co., Ltd5.18Dec 2018North Building of OrientalCulture and Art CenterOfficeAEW, HONY CapitalHOPSON4.05buyers were the major buyers in the55.2%13.5%52.6%50.3%56.6%44.3%3.7%32.6%2019 over the past decade, Knight Frankthe weakening RMB exchange rate.2024.1%11.7%share of buyers in Beijing market inBEIJING KEY TRANSACTIONSProperty type16.5%51.3%35.4%2Project20.8%Foreign Buyer47.3%Foreign buyers accounted for the biggestDate15.4%13.5%14.6%buyers accounted for only 19.6%.Institutional Note: Data for transactions of USD 2.5 million or more from 2010 to Q1 2020, excluding 'Other Buyer' in RCASource：RCA, Knight Frank Researchmarket, accounting for 55.2% of thetransaction value, while REITS/listed companies, private buyers andinstitutional buyers accounted for 29%,12% and 3.7% respectively.2112.0%Q1 2020

China Commercial Real Estate Investment Market (June 2020)China Commercial Real Estate Investment Market (June 2020)BEIJING SELLER POFILEBy transaction value, in the fouryears from 2010 to 2013, Beijing realestate investment market was mainlydominated by private sellers. From 2014to 2016, foreign sellers were the mainFig 13. Seller composition of major property transaction marketin BeijingPrivate Sellerones while between 2017 and 2019, sellersegmentation proportion continued to31.9%18.5%REITS/Listed ional SellerForeign 3.5%increase of 29.8 percentage points YoY.Private sellers accounted for about 39.1%of the total transaction value, a increase23.6%61.7%46.7%55.4%Foreign sellers accounted for 22.2% ofthe total transaction value in 2019, asignificant decrease of 29.4 percentage6.7%22.7%56.7%21.7%10.8%55.6%3.7%26.4%of 16.1 percentage points 82019Note: Data for transactions of USD 2.5 million or more from 2010 to Q1 2020, excluding 'Other Seller' in RCASource：RCA, Knight Frank Researchpoints YoY while institutional sellersaccounted for approximately 5.2%, adecrease of 16.5 percentage points YoY.50.0%23.0%11.8%201049.3%17.2%In 2019, the share of REITS/ listedcompanies was 33.5%, a significant5.2%31.8%0.7%Q1 202004.SHANGHAIINVESTMENT MARKETIn Q1 2020, REITS/ listed companiesaccounted for 50% of the total salestransaction value, and the remainingsales transactions came from foreign andprivate sellers, accounting for 49.3% and0.7% respectively.2223

China Commercial Real Estate Investment Market (June 2020)China Commercial Real Estate Investment Market (June 2020)SHANGHAI ECONOMIC OVERVIEW103.424.28millionRMB785.6bn3.4% yoySHANGHAI TRANSACTIONS –NUMBERRMB306bn6.7% yoy20.4% yoyIn the past ten years, the averagenumber of major property transactionsPermanent Populat

CHINA COMMERCIAL REAL ESTATE INVESTMENT MARKET -JUNE CHINA COMMERCIAL REAL ESTATE INVESTMENT MARKET -JUNE 7 CHINA'S ECONOMIC INDICATORS According to the data from National Bureau of Statistics of China (NBS), in Q1 2020, due to the COVID-19 outbreak, China's GDP was down 6.8% YoY. The added value of the secondary