
It is a challenging time for global real estate market, but the green shoot has been found in Chinese real estate sector, as China has been successful in containing the COVID-19, and led the world in terms of economic recovery, Haoran Wu of Nuveen shared her observations on global and Chinese real estate market during the pandemic.
15 September 2020
It is not surprising that now is a very challenging time for the global real estate market because of the outbreak of COVID-19. Given the heightening uncertainty, property transaction has been rather depressed and investment volume fell a lot. But China seems to be an exception. The green shoot is firstly found in the Chinese real estate sector. We have also seen ever-rising interests of Chinese real estate market from global institutional investors.
Haoran Wu, Research at Nuveen Real Estate, one of the top 5 real estate investment managers in the world, shared her observations about the impacts of this health crisis on global real estate market and Chinese real estate market, in particular, pointing out how China differs from its global peers in the path of recovery and the trends and opportunities emerging from the crisis.

“All these observations indicate the ever-rising interest of this asset class in China from global institutional investors.
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Q: In what ways have COVID-19 impacted the commercial real estate industry so far? What are the implications for various stakeholders (occupiers, operators, landlords etc.?)
- The impact is not uniform across various real estate sectors:
- Hotel is the hardest hit because the demand for leisure and business trip is still muted. Occupancy rate and RevPAR still well below the historical average.
- Retail property is still facing tremendous headwinds because of the social distancing measures and customer health concerns and there has been a surge of retail bankruptcy which increases the tenancy risk.
- For the Office sector, firms are delaying real estate decisions because of economic uncertainty which has slowed the leasing activities.
- The logistic sector is arguably the most resilient sector because of the needs of storing and delivering essential goods and people’s increasing reliance on online shopping.
Q: Having been the first to enter into and emerge out from the crisis, how China differs from its global peers in its path to recovery in terms of its Commercial Real Estate (CRE) market?
- China is the only major economy with positive GDP growth during Q2, PMI and confidence indices have confirmed the return of domestic activities;
- For the office sector, leasing volume has come out of the Q1 lows already during the past quarter.
- Shopping centre footfall was back to 80% as early as May and many international retailers are heavily relying on the Chinese market.
- We expect this outperformance to continue in the coming month.
- We have leveraged our lessons learned from our own assets in China to guide our operation in Europe.
Q: What are some of the trends that emerged from the health crisis that would shape the future landscape of global CRE market??
- For the office sector, the cultural resistance of remote working started to soften in Asia. The pandemic makes firms to be more flexible in managing their office portfolios.
- For the retail sector, we have seen further disruption from e-commerce: online shopping has penetrated deeper into areas that were previously internet proofed.
- For the logistic sector, the crisis and the uncertainty of foreign policies made international companies to rethink their supply chain strategy, putting more emphasis on resilience rather than cost, which could increase new demand for more localised/regionalised logistic space.
Q: What do you think are the opportunities that China hold for global CRE investors?
- In the period of uncertainty, we generally favoured more defensive sectors, like data centre, multi-family and modern logistics.
- For modern logistics, the preference for online groceries shopping translates into additional demand for cold storage. E-commerce grocers were among the only few tenants still signing new leases in Shanghai.
- For the retail sector, we have seen global retailers doubling down in China and the global travel restrictions favoured Chinese domestic retail properties because the spending overseas has all trapped.
Q: Based on your observation of China’s CRE capital market, have you seen a shift of investor appetite more recently?
- Property transaction has been rather depressed because of the pandemic. Site visits were seriously affected;
- Given the heightening uncertainty, global investors have adopted a wait and see approach at the regional level;
- China is the only market in APAC with positive volume growth when investment volume fell by 37% year YoY during the last quarter in the APAC, and Q2 volume nearly doubled than last year;
- Large deals from overseas investors are also impressive in China;
- Overseas investors’ interest remained firm despite global travel restrictions.
- We have seen greater penetration of cross-border capital into cities like Tianjin, Nanjing and Hangzhou which were previously dominated by domestic players.
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