China’s main economic goal in 2016 is to manage a soft landing. This will enable it to achieve a smooth transition to a “new normal” that will allow for slower but more sustainable development.
Slower economic growth, in combination with abundant new supply, is set to push up vacancy rates for both office and retail assets across most markets in the mainland. Rental growth, meanwhile, is forecasted to decelerate. Driven by resilient demand, logistics rents in most markets are expected to continue to rise in 2016. Domestic institutional investors are expected to become increasingly active in the market in 2016.
Office: Rents in tier I cities are expected to remain steady, while those in a number of tier II cities are likely to come under increasing pressure.
Retail: The retail sector may face headwinds in the near term; rental growth is likely to be sluggish in 2016.
Industrial: Huge room for growth in the logistics sector; logistics rents are expected to rise further in 2016.
Investment: Offices remain the preferred asset class in the investment market; Chinese capital continues to seek diversification in overseas markets.
Hong Kong market: The office sector is expected to continue to experience rental growth, as well as remain a key focus of investors; the retail and logistics sectors are likely to endure a market slowdown.
Frank Chen, CFA
Head of Research, China
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Head of Research, Hong Kong, Macau & Taiwan
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