Savills China Research Beijing Briefing Sales and Investment October 218 SUMMARY Image: ZLink, Haidian District The latest round of policy adjustments will halt new commercial land supply in the main urban areas of Beijing. The regulations are expected to push up capital values of current stock. The total transaction area in the first-hand strata-title office and retail markets reached 164, sq m and 15, sq m, respectively. Only four en-bloc transactions were closed in /218 for a total consideration of RMB3.57 billion. Grade A office capital values registered an average of RMB85,38 per sq m. Meanwhile, Grade A office gross reversionary yields tightened by.6 percentage points (ppts) to 5.14%. A total of 13 land plots were transacted in /218 for a combined transaction volume of RMB16.5 billion, down 7.7% QoQ. Seven of the land plots were positioned for residential usage and one plot for commercial usage. Beijing authorities announced the Catalogue of Prohibitions and Restrictions on New Industries in Beijing (218 Edition) in /218. Public policies are tightening and are expected to have a profound impact on the city s real estate sector the investment market in particular. Jack Xiong, Savills Research & Consultancy savills.com.cn/research 1
Briefing Beijing sales and investment October 218 Policy adjustment 26 September 218 Beijing authorities announced the Catalogue of Prohibitions and Restrictions on New Industries in Beijing (218 Edition). GRAPH 1 First-hand strata-title office sales, /28 /218 3 25 2 Highlights include: - Office projects are forbidden within Dongcheng and Xicheng districts, and the East, West, and North Fifth Ring Road and South Fourth Ring Road areas of Chaoyang, Haidian, Fengtai and Shijingshan districts. 15 1 5-8 9 1 11 12 13 14 15 16 17 18 - Commercial retail facilities over 1, sq m are forbidden within the Third Ring Road area. The latest round of policy adjustments will halt new commercial land supply in the main urban areas of Beijing. The move is expected to push up capital values and rental expectations for available stock in the market. Office sector All grades The first-hand strata-title office market witnessed 382,5 sq m of new supply in /218, up 45.3% QoQ and 65.7% year-on-year (YoY). Total transaction area reached 16,4 sq m during /218, up 5.1% QoQ and 85.1% YoY, respectively. Meanwhile, total consideration was up by 17.3% QoQ and 61.2% YoY to RMB4.17 billion. Average transaction prices were down 3.7% QoQ and 12.9% YoY to RMB 26,13 per sq m. volumes in /218 were concentrated in non-prime and suburban districts, namely Tongzhou, Mentougou and Daxing. Tongzhou accounted for 18% of the total transacted area, while Mentougou and Daxing took second and third place with 16.6% GRAPH 2 First-hand strata-title office supply and transaction by area, 28 /218 ' sq m 2,5 2, 1,5 1, 5 Traditional Non-prime & suburban 28 29 21 211 212 213 214 215 216 217 218 GRAPH 3 Grade A capital values and yields, /27 /218 RMB per sq m 85, 68, 51, 34, 17, Capital value (LHS) Gross yield (RHS) 7 8 9 1 11 12 13 14 15 16 17 18 15% 12% 9% 6% 3% % 2
Briefing Beijing sales and investment October 218 and 15.5%, respectively. Tongzhou continued to rank first in terms of total consideration accounting for 23.9%, while Mentougou (18.8%) and Daxing (17.5%) followed closely behind. Grade A office market Grade A office capital values continued to grow to an average of RMB85,38 per sq m by the end of /218. Meanwhile, Grade A office gross reversionary yields continued to tighten by.6 ppts to 5.14%. Retail sector New supply in the first-hand stratatitle retail market reached 76, sq m in /218, up 13% QoQ and 4.4% YoY. Total transaction area decreased by 19.8% QoQ and 1.6% YoY to 15, sq m by the end of /218. Total consideration recorded RMB3.61 billion in the quarter, down 4.1% QoQ although up by.7% YoY. Average transaction prices registered RMB34,284 per sq m, up 19.5% QoQ and 26.8% YoY. En-bloc investment market The en-bloc investment market witnessed a total of four completed deals, which registered a total consideration of RMB3.57 billion, in /218. Traditional asset classes proved popular during the quarter with deals concluded in both the office and retail markets. GRAPH 4 First-hand strata-title retail sales, /28 /218 16 14 12 1-8 6 4 2 - ZLink in Zhongguancun Software Park located in Haidian was acquired by Allianz for a total consideration of RMB1.3 billion. - Fangheng Fashion Centre located in Haidian was acquired by Toutiao for a consideration of RMB2.2billion. 8 9 1 11 12 13 14 15 16 17 18 TABLE 1 Major first-hand strata-title office projects, /218 Project Chang an Paradise Walk 长安天街 Park Lounge 招商嘉铭 珑原 Gemdale Future Life 金地未未来 Location Mentougou Changping Shunyi Developer Longfor Group China Merchants Land Limited Gemdale Group area (sq m) 16,725 18,73 13,234 Average price (RMB per sq m) 27,92 11,68 23,237 savills.com.cn/research 3
Briefing Beijing sales and investment October 218 - China Life Investment Holding Company purchased 1% equity shares for both the podium at Tongtai Plaza and the podium at No.25 Longze West Mansion for an undisclosed consideration. Land market A total of 13 land plots were transacted in /218 for a combined consideration of RMB16.46 billion, down 7.7% QoQ and 8.4% YoY. Seven of the new plots were designated or partially designated for residential usage and the remainder were registered as one commercial plot and five industrial plots. One major deal during the quarter saw China Galaxy Securities and China Securities Internet System Co., Ltd acquire a 12, sq m multi-usage plot in Lize district for RMB3.2 billion. Market outlook With no regulatory loosening in the near future, it is expected the transaction volume of strata-title commercial projects will remain low and will be focused on existing stock in the market. Companies with actual investment needs for assets are expected to be transaction drivers, while there will continue to be a shift away from speculative activity. The new policy adjustments will halt new commercial land supply in the main urban areas of Beijing. The move is expected to push up capital values and rental expectations, particularly in mature business districts. Currently, institutional investors continue to target assets that offer superior locations and high returns. GRAPH 5 En-bloc investment volumes, 27 /218 GRAPH 6 En-bloc investment volumes by property type, 27 /218 GRAPH 7 Land transaction volumes, 28 /218 6 5 4 3 2 1 6 5 4 3 2 1 3 25 2 15 1 5 27 28 29 21 211 212 213 214 215 216 217 218 Office Retail Apartment Serviced apartment Hotel Complex 27 28 29 21 211 212 213 214 215 216 217 218 The Beijing Municipal Government recently outlined the necessity 28 29 21 211 212 213 214 215 216 217 218 4
Briefing Beijing sales and investment October 218 for making rational use of land resources and highlighted the importance of strengthening the residential land supply. Authorities have allocated 66 land plots for residential usage, 17 of which will be listed for sale in the near future. The majority of the plots will be positioned for joint-ownership and price-capped housing. This supply-side reform is expected to ensure the stability and healthy development of the residential market. TABLE 2 Major strata-title retail projects, /218 Project Jade Plaza 龙湖 西宸广场 House in Park 首开万科公园里 Colorful Garden 住总正华多彩嘉园 Location Fengtai Tongzhou Daxing Property Type Strata-title Retail Residential/Retail Podium Residential / Retail Podium Developer Longfor Group Beijing Capital Development Holding Group / Vanke BUCG area (sq m) 3,736 3,261 3,549 Average price (RMB per sq m) 44,433 44,97 34,717 TABLE 3 Major En-bloc transactions, /218 Project Podium of Tongtai Plaza 通泰大厦底商 Podium of No.25 Longze West Mansion 龙泽苑西区 25 号楼底商 Fangheng Fashion Center 方恒时尚中心 ZLink 高科岭 Buyer China Life Investment Holding Company Ltd China Life Investment Holding Company Ltd Toutiao Seller Beijing Tiantai Beijing Tiantai Beijing Fangheng Land Allianz KaiLong REI Inv & Goldman Sachs Location Xicheng Changping Haidian Haidian Purchased area(sq m) 76,8 4,268 3,638 31,425 Sales volume (million) N/A N/A 2,229 1,34 Unit price (RMB per sq m) N/A N/A 72,753 43,511 Deal Structure Onshore equity transaction Onshore equity transaction Asset transaction Offshore equity transaction (98%) savills.com.cn/research 5
Briefing Beijing sales and investment October 218 TABLE 4 Major land transactions, /218 Plot Location Planned GFA (sq m) Usage Consideration () Buyer Fengtai 218 14 Fengtai 12, Commercial 3.19 China Securities Internet System / China Galaxy Securities Chaoyang 218 17 Shunyi 218 13 Daxing 218 15 Daxing 218 16 Chaoyang 84,324 Residential 2.91 China Overseas Shunyi 65,458 Residential 2.6 Jiangong Real Estate Daxing 11,976 Residential 2.8 China Resources / Jinmao Daxing 87,417 Residential 1.73 China Overseas Please contact us for further information Research Central Management Research & Consultancy Investment James Macdonald Senior Director China +8621 6391 6688 james.macdonald@savills.com.cn Anthony McQuade Managing Director North China +861 5925 22 anthony.mcquade@savills.com.cn Jack Xiong Director Beijing +861 5925 242 jack.xiong@savills.com.cn Spring Cao Senior Director Beijing +861 5925 248 spring.cao@savills.com.cn Savills plc Savills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 6 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research. 6