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Savills 2017 Global Real Estate tips

2017-03-19

Recently, the 2016 Central Economic Work Conference ended. The meeting emphasized the need to curb the real estate bubble and deleverage, continued to reveal the signal of monetary tightening, and was committed to studying and establishing a basic system and a long-term mechanism in line with national conditions and market laws. In the face of the low growth rate of China's economy in the past two decades, GDP growth in the fourth quarter is expected to stabilize at 6.7%. The real estate market was also changing this year: the "double limit" policy of the real estate market was strictly introduced, the supply of office buildings was increasing day by day, and the transformation of real businesses was facing challenges; Looking at the world: Brexit of the UK, interest rate increase by the Federal Reserve and RMB devaluation affect the global real estate situation. Mr. Liu Deyang, CEO and Chairman of Savills China, made an in-depth comment on major events in the economic and real estate fields, and comprehensively analyzed the general trend of China's market in 2017. Chinese Capital Going to Sea: Where to Go? In 2017, the voice of Chinese enterprises' "going to sea" continued, but there was a wind of the country's tightening overseas investment. Is it difficult or easy for Chinese enterprises to "go to sea"? Liu Deyang: From the global macro perspective, the world political and economic pattern is changing. The US economy is currently in a rising period. After nearly a year of "lip service interest rate hikes", the Federal Reserve finally took action. This round of interest rate hikes may cause corresponding fluctuations in interest rates of other economies, including China. Once interest rates are raised, the amount of money in circulation and outflow will decrease, and the economic growth will also slow down. In 2017, the Federal Reserve is expected to raise interest rates three times, so we need to observe for a while to analyze the potential linkage effect on the Chinese market. From the perspective of the long-term strategy of the Chinese government, the government still encourages Chinese enterprises to go abroad, but in the short term, measures should be taken to prevent excessive loss of foreign exchange. There is no trend of "restriction" in the current policy, which still focuses on reasonable control. As the market matures, it is a general trend for Chinese enterprises to go abroad and expand overseas. This is also the best channel for Chinese enterprises to understand and adapt to the world's business rules, and is also the only way for large-scale enterprises to develop internationally. Under the overall housing purchase restriction environment in domestic first tier cities, is personal overseas real estate investment another good investment channel? Liu Deyang: The domestic purchase and loan restriction policy is in the tightening stage, while the asset prices in some foreign cities have decreased significantly, and overseas investment deserves attention. From the second half of last year to this year, the property market prices in China's first tier cities have risen rapidly. Compared with some mature overseas markets, for example, London, the United Kingdom, after the Brexit, both house prices and exchange rates are very attractive, and some asset prices have even dropped significantly. However, individual overseas investment needs to be strictly approved by the Administration of Foreign Exchange, so whether the final transaction is successful still needs to consider the comprehensive factors of all parties. Retail real estate: the transformation road of real business There are many examples of department stores closing in 2016. How do you view the crisis of big department stores and retail market reflected by this event? Liu Deyang: China's economy is in the process of adjustment. The change of consumption power has a great impact on the retail industry, and the retail industry itself is also in the process of transformation and transformation. Department stores bear the great changes in China's commercial real estate and are of historical significance. At the beginning of the reform and opening up, only the business license of the department store can import and export goods. It was once the best platform for brand display. Now the market is open, and high-end brands enter the exclusive stores; Goods with high cost performance are settled in online stores; The cosmetics counter, which used to occupy the first floor, is also submerged in overseas purchasing. Brand loss has greatly weakened the competitiveness of department stores. Therefore, no matter the future development focus of department stores is to keep pace with the times, so as to get out of the slightly embarrassing situation. In fact, it is not just department stores. In recent years, retail real estate has faced the problem of transformation and renewal. Have you observed the emergence of some new and successful cases? Liu Deyang: The transformation of commercial real estate also includes changes in retail mode and marketing methods. In order to cope with the fierce competition and catch the eye of consumers, both retailers and developers have constantly introduced innovative marketing techniques. For example, Pop up Store, which is widely praised in the market. I am very optimistic about this kind of marketing model. It makes the original "solid" shopping center more "dynamic", makes full use of space, and constantly introduces new brands, new products and new activities. For new retailers in China, the Pop up Store can be used to test the water. For mature brands, the Pop up Store can be used to flexibly display products and enhance brand appeal. At the same time, with the consumers' pursuit of health and quality of life, we can see that outdoor sports in the retail market this year are favored by more and more consumers, and life and leisure are expanding rapidly. The positioning of such goods is more clear, and professional and leisure goods develop in a balanced way. Office building: new model adds new impetus In recent years, joint office space has developed rapidly. Is there a real market demand for joint office space? Liu Deyang: At present, there are two driving forces for joint office space. It can be said that joint office space is a good helper for the market. The first driving force comes from the country's promotion of "mass entrepreneurship and innovation" and the encouragement of the Internet, which increases the demand for joint office space. The second driving force comes from the office supply peak in the next 1.5 to 3 years. High supply promotes the emergence of diversified office space, and joint office is one of the important types. Joint office space can better control office costs and is very attractive to emerging enterprises. When emerging enterprises have a certain scale, they will turn to traditional office buildings. Therefore, joint office space is more like a carrier and complements traditional office buildings. In addition to professional joint office space operators, some developers are also actively engaged in the creation of joint office space. Is the yield of joint office space significant? Liu Deyang: I think that developers' operation of joint office space is not entirely a consideration of short-term benefits, but more focused on the three elements. First of all, the joint office space operated by developers is more like providing an incubation base for emerging enterprises and investing or acquiring potential emerging enterprises in the future; Secondly, with the promotion of "mass entrepreneurship and innovation" by the state, allocating space for some new projects to create joint office space is also considered for the brand promotion of the project; Finally, after a certain scale, emerging enterprises may also become one of the main tenants of the office building, which is also a potential tenant reserve for the office building. The general trend of China's future real estate market in 2017 Trend 1: China's retail industry has huge development space China's retail industry is full of challenges. Is it still attractive to retailers? Liu Deyang: The global economy is still in a downturn. For retailers, challenges are everywhere. But China, rather than full of challenges, is more of an opportunity. China has a large consumer group, and there are many new areas that have not been developed, so there is a lot of room for retailers to expand. For international retailers, I think the challenges are more from the differences in culture and consumption habits. Chinese consumers accept new things quickly and their preferences change rapidly. At present, China is vigorously developing the Internet. Retailers should combine the Internet to quickly penetrate the Chinese market, expand brand influence, keep pace with consumers, and even lead the future consumption trend. For local retailers, they should take advantage of the advantage of "first come, first served". Focus on the needs of domestic consumers, and make great efforts in marketing strategy, brand building, product quality and packaging. Ignoring the domestic market may cause huge losses. Trend 2: The demand for office buildings has entered the era of segmentation Office buildings are facing peak supply, even in the first tier cities. Are you worried about the future office building market in the first tier cities? Liu Deyang: The office building market in the first tier cities has entered a very subdivided market. Taking Shanghai as an example, we can no longer make a macro analysis of the entire Shanghai office building market, so we need to further explore the subdivided market. The supply in the core area is still limited, the rent is stable, and the vacancy rate remains low. The secondary business district has a large supply, so developers should build projects according to the regional positioning to attract specific tenants. For example, Xuhui Binjiang, with DreamWorks and Hunan Satellite TV, is more oriented to the culture and entertainment industry; Hongqiao plate has the advantage of a transportation hub, which has a stronger attraction for the manufacturing industry in the Yangtze River Delta area; The North Bund area is dominated by self use office buildings of large state-owned enterprises. Shanghai is China's window to the world. As a gateway city of China, Shanghai is making every effort to build a global financial center, the "Belt and Road" and a free trade zone and other large-scale strategic plans, which will strengthen China's trade, investment and business ties with its neighbors. In addition, some multinational enterprises have planned to deploy expansion in China, which is believed to further stimulate the growth of demand for office buildings. Asset management becomes the key to success China's first tier cities have scarce land and high prices. How should liberals cope with these challenges and develop steadily? Liu Deyang: The land supply in China's first tier cities is scarce, and the land price is getting higher and higher. Developers who used to be busy with "land acquisition and building sales" will face the problem of diversified development and operation in this round of adjustment. Developers are difficult to maintain high growth. A single and extensive "business" model needs to further combine the sustainable "business" model, optimize the operation of high-quality commercial projects, and prepare for obtaining stable income in the future. This means that enterprises need to reduce liabilities, actively improve project marketing management, reserve professional operation talent teams, and truly play the game of "asset management" for sustainable development. Trend 4: In the second half of 2017, the watershed of the housing market may reappear In 2016, the regulation and control of housing continued to rise one after another, and Shanghai tightened credit again near the end of the year. How about the impact on the housing market in 2017? Liu Deyang: The housing market from the end of 2015 to 2016 is too enthusiastic, and the policy adjustment also hopes to stabilize the market. The housing market in Shanghai ushered in the "tight spell" again at the end of the year. Therefore, the first half of 2017 should be the condensation period of the housing market, with both turnover and prices slowing down. The market is expected to gradually recover in the second half of 2017. The specific recovery depends on the overall economic situation of China, so the second half of 2017 should be the watershed of the housing market. However, challenges always coexist with opportunities. The cooling of the residential sales market will stimulate the improvement of the rental market. In particular, the serviced apartment market is an important part of the rental market. We have seen the increasing demand from local tenants in the recent market. I believe that the service apartment market will have a more eye-catching performance in the future.

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