As we tread carefully into the Year of the Pig, we expect cautionary sentiment in the market to lead stakeholders to act conservatively as we navigate through the uncertainties of 2019, as summarised in our latest report: Forging on – steering past the uncertainty ahead.
Despite ongoing trade war tensions and more pronounced concerns over slower economic growth, we can still consider 2018 a strong year for commercial real estate in Beijing. The TMT industry drove strong demand, with the office leasing market recording its highest net absorption levels in five years. Industrial rents registered record rental growth during the year. Foreign investment climbed towards the end of the year, contributing to the 50 percent-increase in total en bloc sales.
2018: driven by innovation, decentralisation
Two major themes drove the market in 2018: innovation and decentralisation. We saw plenty of innovation finding its way into commercial real estate during the year, with co-working increasingly focusing on the workplace experience and evolving the way we work – and ‘new retail’ further integrating online and offline worlds to drive new habits for the way we shop. Rental housing was full blown in the market, providing us with a new way of living.
Decentralisation was another key theme in 2018. In the office sector, all new supply opened in non-core areas or emerging submarkets such as Lize, which is destined to become an important new district supporting growth of the office market. Suburban growth fuelled the retail market, with the majority of new malls located beyond the Fifth Ring Road. We also saw the Beijing municipal government finally make headway on its long-anticipated plans to move to Tongzhou, crossing a significant milestone in future planning that is expected to expedite development progress in the area. As policy continues to restrict core development, growth opportunities will be increasingly found in the outer edges of the city.
2019: all about expectations
But as 2019 gets underway, we are already seeing lowered expectations setting the tone. Conservative decisions are becoming popular under the current economic climate and are forecast to have a real impact on the market. The ongoing trade war is predicted to reach a turning point, which will further dictate activity in the market for the remainder of the year.
During this period of heightened economic uncertainty, unicorn companies and fast-rising start-ups are expected to remain a bright spot in the market and lead rental growth in IT-driven office clusters. In the retail market, the slow-growth environment is expected to further shift the focus of consumer spending to lifestyle-oriented offerings as consumers prefer to maintain their quality of life. This is expected to lead to more stable demand for F&B, entertainment, and children’s categories in 2019. In the investment market, expectations are expected to slide in 2019, but confidence in the market is set to remain strong overall as investors continue chasing opportunities under the belief that assets will be increasingly valuable over the long term.
There is no shortage of challenges facing the market in 2019, but we see potential opportunities for stakeholders to steer past the uncertainty ahead.
Plan ahead for 2019 and catch up on the market highlights from 2018 by downloading our full report: Forging on – steering past the uncertainty.
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