China Business

Oct 25, 2005

Commercial property market overheating

BEIJING - China's investment in commercial property witnessed robust growth of 23.8% year-on-year in the first half of 2005, according to the Ministry of Commerce (MOC).

The MOC disclosed that many real estate developers in China shifted their interest from residential housing to commercial buildings after the state enacted macroeconomic control

measures to cool the real estate industry. In particular, overseas investors such as CapitaLand, Sun-Ref and Morgan Stanley have stepped into the commercial property field.

The MOC forecast earlier that the rapid pace of urbanization and upgrading of consumption composition will boost urban commercial development in China, in which commercial operation facilities (aka shopping centers) are expected to become a hot spot of investment. China's investment in commercial buildings totaled 172.3 billion yuan (US$21.2 billion) in 2004, soaring 31.4% over 2003.

The MOC also revealed that commercial estate investment in some areas posted an excessive increase in the first half of this year. For instance, commercial investments in Beijing grew 34.6% year-on-year, those in Haikou jumped by 67.9%, Shanghai commercial property investments shot up 96.9%, and those in Wuhan rocketed by 218.7%.

However, the space of vacant commercial buildings increased by a dramatic 21% nationwide during the same time, much higher than the 7.9% increase for commodity houses and 2.2% rise for residential houses, an MOC official noted. The vacant space for commercial buildings in Beijing shot up at a 133% rate, far higher than the rate of investment growth, suggesting that the current growth rate is unsustainable.

(Asia Pulse/XIC)

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