International investments are being ploughed into the Chinese property market
Global investors now regard China’s more mature property market as a great opportunity to access one of the world’s fastest-growing economies.
As China’s fast-growing companies and the innovation economy are transform the property market across the country, China is becoming less “the worlds factory” and more the world’s largest property investment opportunity.
Technology firms and service-based companies are filling up office spaces of modern glass skyscrapers. Logistics groups are seeking for bigger warehouses desperate to satisfy expanding consumer demand. Consequently, commercial property is being viewed as business on the rise.
China’s property market still grapples with transparency issues, and foreign investors face stiff domestic competition, however, enthusiasm is high and investors are keen.
According to JLL’s China 12 report, direct investment into China’s commercial property market could blossom to US$150 billion a year, from the current US$40 billion
This level would see China challenging the U.S. as the largest commercial real estate investment market in the world. And it’s not just the commercial property.
China’s rental market is going crazy
Overseas private equity funds have been piling into China’s rental flat sector in the past few months, on the back of strong government support and shifting consumption patterns among the younger generation.
There is a growing population of young urban professionals in China who want a good quality of life and have disposable income, but either can’t afford or are unwilling to buy their own home.
According to a recent Savills report, increasing residential prices, decreasing housing affordability, a highly mobile workforce as well as “a younger, more spendthrift demographic that prefer to invest in stocks than bricks and mortar” as prime factors driving the rental market.
As a result, China’s market of 190 million renters will grow to 250 million by 2025, reflecting a value of 2.9 trillion yuan (US$452.88 million).
Just last week Tiger Global Management, a US-based global investment firm, led a US$70 million series B+ round in Chinese long-term apartment leasing firm Danke Gongyu. That followed a batch of local and global funds that closed a US$100 million financing on Danke in February, all of whom participated in the latest June round.
Danke manages more than 120,000 rooms in eight cities including Beijing, Shanghai, Shenzhen, Hangzhou, Tianjin, Wuhan, Guangzhou and Nanjing. The company aims to accelerate its expansion in China’s first-tier cities in the next six months. It target is 300,000 apartments under management by the end of this year.
In May, Uoko.com completed a C1 round worth 1 billion yuan (US$157 million), including equity and debt financing from various venture capital firms and banks.
In April, Morgan Stanley Private Equity Asia and private equity fund Crescent Point led a series C round in Shanghai-based long-term apartment rental provider QingKe.
In January, Ziroom raised a 4 billion yuan (US$622 million) series A round led by Warburg Pincus, Tencent and Sequoia Capital China.
Last month, GIC, Singapore’s sovereign wealth fund, announced to partner with Nova, a Shanghai-based investment manager co-founded by Warburg Pincus, to establish a 4.3 billion yuan (US$675 million ) rental apartment platform in China.
Some private equity firms have also co-founded rental flat brands with hotel management groups. For example, IDG Capital co-launched Cjia in 2015 with Huazhu Hotel Group, a Shanghai-based firm.