Savills World Research

Briefing Sales and Investment January 2018

Image: W Hotel Beijing, Jianguomen SUMMARY Multiple commercial projects were acquired in Q4/2017. Investors showed a strong preference for assets in prime locations with potential for higher returns.

 The first-hand strata-title office  The en-bloc sales market and retail markets rebounded in witnessed 29 deals close in “The en-bloc sales market in Q4/2017, with total transaction area 2017, registering an aggregate Beijing is expected to remain robust increasing by 14.2% and 45.7% consideration of RMB44.54 billion throughout 2018. However, limited quarter-on-quarter (QoQ) to 99,000 and an increase of 21% year-on-year tradable assets in prime locations sq m and 203,000 sq m, respectively. (YoY). will see institutional investors pay attention to commercial projects  Seven en-bloc transactions were  28 land plots were transacted in in non-prime areas, which through concluded in Q4/2017, recording Q4/2017. Total transaction volume a total consideration of RMB14.06 reached RMB94.86 billion, up redevelopment and upgrading offer billion. 18.5% QoQ. A total of 22 plots were the potential for greater returns.” Jack positioned for residential usage. Xiong, Savills Research & Consultancy

savills.com.cn/research 01 Briefing |Beijing sales and investment January 2018

Market Commentary GRAPH 1 New supply in the first-hand, First-Hand, Strata-Title Office Sales, Q1/2008– strata-title office market reached Q4/2017 212,000 sq m during Q4/2017, down 30 8.4% QoQ. Total transaction area increased by 14.2% QoQ to 99,000 25 sq m, while total consideration fell 18.7% QoQ to RMB2.1 billion. The 20 average transaction price registered RMB21,258 per sq m. The first-hand, 15 strata-title office market witnessed

a significant decline in performance billion RMB during 2017, largely due to the 10 tightening of purchasing restrictions on commercial property. Total 5 transaction area was recorded at 670,600 sq m and total consideration - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 reached RMB20.34 billion, both 08 09 10 11 12 13 14 15 16 17 down 68.7% and 69.3% YoY. Source: Savills Research & Consultancy

The first-hand, strata-title retail GRAPH 2 market received 134,000 sq m of new supply in Q4/2017, up 34% First-Hand, Strata-Title Office Supply and QoQ. Total transaction area reached Transaction by Area, 2008–Q4/2017 203,000 sq m, up 45.7% QoQ. Total Traditional Emerging consideration registered RMB6.07 2,500 billion, up 69.4% QoQ. Total transaction area and consideration 2,000 registered 803,600 sq m and RMB23.49 billion in 2017, down 1,500 42.6% and 44.9% YoY, respectively. 1,000 '000 sq m Demand was robust in the en-bloc sales market in Q4/2017. Seven 500 deals were closed, the majority of which were office projects, for a total 0 consideration of RMB14.06 billion. Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply The market witnessed 29 deals closing in 2017, registering Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 an aggregate consideration of Source: Savills Research & Consultancy

GRAPH 3 RMB44.54 billion and an increase RMB279.6 billion. The substantial Grade A Capital Values and Yields, of 21% YoY. The most active increase in new land supply is expected to significantly curb the Q1/2007–Q4/2017figure3 EN purchasing demand stemmed from domestic investors. rise of Beijing’s housing prices in the Capital value (LHS) Gross yield (RHS) 80,000 16% future.

70,000 14% The land market received an abundance of supply in Q4/2017. Office Sector 60,000 12% 28 plots were transacted for a All Grades 50,000 10% consideration of RMB 94.86 billion. The first-hand strata-title office 40,000 8% 22 of the new plots were designated market welcomed 212,000 sq m of

RMB per sq m 30,000 6% or partially designated for residential new supply in Q4/2017, down 8.4%

20,000 4% usage, while only three plots were QoQ and 26.5% YoY. Although the zoned for commercial usage. The market continues to be restricted 10,000 2% total volume of land supply in Beijing by purchasing regulations on 0 0% increased considerably in 2017, commercial-titled projects, the level Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 07 08 09 10 11 12 13 14 15 16 17 with 102 land plots transacted of transaction volume has begun Source: Savills Research & Consultancy for a combined consideration of to rebound. Total transaction area Page 1

02 Briefing |Beijing sales and investment January 2018

increased by 14.2% QoQ to 99,000 largest proportion of transaction area, GRAPH 4 sq m during Q4/2017, however it is accounting for 41% of total office First-Hand, Strata-Title Retail still down by 86.7% YoY. area transacted during Q4/2017. Sales, Q1/2008–Q4/2017 Tongzhou was next with Total consideration declined 18.7% 14%. In terms of total consideration, 16

QoQ and 91.9% YoY to RMB2.1 Fengtai and Tongzhou districts 14 billion by the end of Q4/2017. took the lead, accounting for 29% 12 Meanwhile, average transaction and 15% of total transactions, 10 prices were down 28.8% QoQ and respectively. 38.8% YoY to RMB 21,258 per sq m. 8 Grade A Office Market billion RMB 6

During Q4/2017, transaction Stable investment demand for office 4 volumes were largely concentrated assets in prime locations continues 2 in emerging areas, namely Fengtai, to push up overall capital values in -

Tongzhou, Daxing and Changping the market. Grade A office capital Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 districts. In terms of transaction values registered an average of 08 09 10 11 12 13 14 15 16 17 area, recorded the RMB77,000 per sq m by the end of Source: Savills Research & Consultancy

TABLE 1 Major First-Hand, Strata-Title Office Projects in Q4/2017

Forte Center Beijing Fengtai Wanda Plaza Hengtai Center Project (复地中心) (北京丰科万达广场) (恒泰中心)

Location Tongzhou District Fengtai District Fengtai District

Huizhong Hengtai Commercial Developer Forte Group Wanda Group Management

Transaction area (sq m) 28,870 2,560 43,352

Average Price (RMB/sq m) 56,178 45,057 16,000

Source: Savills Research & Consultancy

TABLE 2 Major Strata-Title Retail Projects in Q4/2017

Jade Plaza New Younger TBD Metropolis Project ( 龙 湖·西 宸 广 场 ) ( 华 远·西 红 世 ) (TBD云集中心)

Location Fengtai District

Property type Residential / Retail Podium Residential / Retail Podium Office / Retail Podium

Beijing TBD Construction / Greenland Developer Longfor Properties Huayuan Group Group / Greenland Group

Transaction area (sq m) 4,472 19,108 10,606

Average Price (RMB/sq m) 60,674 16,661 28,700

Source: Savills Research & Consultancy

savills.com.cn/research 03 Briefing |Beijing sales and investment January 2018

Q4/2017, up 2.5% QoQ and 2.2% GRAPH 5 YoY. Meanwhile, Grade A office gross En-bloc Investment Volumes, 2007–Q4/2017 reversionary yields continued to tighten by 0.07 of a percentage point Q1 Q2 Q3 Q4 (ppt) to 5.27%. 50 45

Retail Sector 40 New supply in the first-hand strata- title retail market reached 134,000 sq 35

m in Q4/2017, up 34% QoQ although 30 down 6.6% YoY. Total transaction 25

area registered 203,100 sq m, billion RMB up 45.7% QoQ and down 54.1% 20

YoY. Total consideration recorded 15 RMB6.07 billion during the quarter, up 69.4% QoQ and down 59.8% 10 YoY. Average transaction prices 5 registered RMB29,889 per sq m, up 0 16.3% QoQ and down 12.5% YoY. 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Savills Research & Consultancy En-bloc Investment Market The en-bloc sales market GRAPH 6 witnessed seven deals close during En-bloc Investment Volumes by Property Type, Q4/2017, recording an aggregate 2007–Q4/2017 consideration of RMB14.06 billion. Total consideration reached Office Retail Apartment Service Apartment Hotel Complex 50 RMB44.54 billion in 2017, marking an increase of 21% YoY, and the fourth 45

consecutive year of robust activity. 40

35 A limited availability of tradable office stock in prime locations saw investor 30 interest increase as assets were

RMB billion RMB 25 made available to the market. Deals 20 of the quarter included: 15

• New Hualian Mansion, located in 10 East Fourth Ring Road, was acquired 5 by Maiweisi Property Management for RMB1.13 billion, marking an 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 average price of RMB74,592 per sq m. Source: Savills Research & Consultancy

• Super Alliance Real Estate Partners purchased a number of floors in • Thaihot Group disposed of Chang Investors continued to purchase Merchants Tower in CBD An Centre Building B (Level 3-21) in commercial assets such as hotels district. The total transaction area to Beijing Liangdou offering favourable investment and price remains undisclosed. Technology. The deal transacted for potential. Q4/2017 deals included: RMB1.8 billion, an average price of Investors continue to pay greater RMB51,437 per sq m. • Tianfu Fund Management acquired attention to assets in non-prime and W Hotel Beijing in Jianguomen emerging areas. More affordable • Technology Park C2-A in Jiuxianqiao for RMB1.984 billion. The deal transaction prices coupled with was acquired by a domestic self- transacted at an average price of greater room for value appreciation user. The deal transacted for a total RMB31,589 per sq m. provided opportunities for investors. consideration of RMB368 million, Major transactions during the quarter registering an average price of RMB Land Market included: 21,793 per sq m. 28 plots were transacted for a consideration of RMB 94.86 billion

04 Briefing |Beijing sales and investment January 2018

during Q4/2017, marking a growth retail and hotel sectors, as well as GRAPH 7 of 18.5% QoQ. 22 of the new serviced apartment and long-term Land Transaction Volumes, 2008– plots were designated or partially leasing apartment projects, all Q4/2017 designated for residential usage – of providing opportunities. Meanwhile, Q1 Q2 Q3 Q4 which two plots were positioned for a greater number of companies 300 owner-occupied commodity housing, are expected to search for self- 250 eight plots for joint ownership use projects, and as a result office housing and the remaining 12 plots projects with affordable prices in 200 for price-capped housing. mature industrial parks are likely to

garner interest. 150 RMB billion RMB Three commercial land plots were transacted during the quarter, all of Restrictions by the Beijing 100 which are zoned for financial service government have subdued the usage. The deals included: Tian’an development of commercial real 50 Life Insurance acquiring a plot in estate in urban areas. Consequently, Shijingshan district for RMB2.11 price appreciation of assets in 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 billion; China Electronics Technology prime locations will be limited. In Group winning the bid for a plot in response, investors have started to Source: Savills Research & Consultancy for RMB2.425 billion; pursue value-added assets which and Hua Insurance acquiring a plot offer greater potential for returns. in Lize Financial Business District, Investment opportunities, such as conditions and regulations, and Fengtai District for RMB3.55 billion, urban renewal and stock conversion intended usage for plot regulation, registering a premium rate of 40.9%. (retail-to-office and hotel-to-office) such as zoning for owner-occupied will continue to grow in popularity. commodity housing, joint-ownership Market Outlook housing or price-capped housing, Domestic institutional investors will The land market is expected to will be strictly enforced. Adhering to continue to play a dominant role in remain active in 2018, as the these conditions will be essential for the investment market. Acquisition government has increased supply developers to continue successfully targets are expected to diversify, with levels to curb housing prices. Land acquiring land.  traditional assets from the office, auctions will face greater purchase

TABLE 3 Major En-bloc Transactions, Q4/2017

Technology Park C2-A W Hotel Beijing Chang An Centre Building B New Hualian Mansion Project (电子科技园C2-A) (W酒店) (泰禾长安中心B栋) (新华联大厦)

Buyer Domestic Company Tianfu Fund Management Beijing Liangdou Technology Maiweisi Property Management

Seller BEZ Electronics Joy City Property Thaihot Group Macrolink Group

Location Chaoyang Chaoyang Shijingshan Chaoyang

Purchased area 12,928 62,805 34,994 15,149 (sq m)

Sales volume 368 1,984 1,800 1,130 (million) Unit price 21,793 31,589 51,437 74,592 (RMB per sq m)

Source: Savills Research & Consultancy

savills.com.cn/research 05 Briefing |Beijing sales and investment January 2018

TABLE 4 Major Land Transactions, Q4/2017

Consideration Plot Location Planned GFA (sq m) Usage Buyer (RMB billion)

Shijingshan Shijingshan 347,895 Mixed Use 8.6 Greentown 2017 – 082

Shijingshan Vanke / CIFI Holdings / Shijingshan 346,496 Mixed Use 7.8 2017 – 083 Excellence Group

Haidian Haidian 201,320 Residential 7.62 Tsinghua Unigroup 2017 – 086

Daxing Poly / Beijing Capital Daxing 165,717 Residential 6.29 2017 – 069 Development

Haidian CRREG / BCED Real Haidian 186,530 Residential 5.35 2017 – 078 Estate

Source: Savills Research & Consultancy

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