HONG KONG, CHINA - Media OutReach - 28 July 2019 - According to Cushman & WakefieldResearch's latest Greater China Capital Markets Express report, MainlandChina's commercial property investment slowed 19% y-o-y to RMB40.2 billion inQ2 as investors become increasingly cautious given ongoing trade friction,softer leasing demand and new supply, particularly in the office sector. Theoffice vacancy rate across Mainland China peaked at 19.7% in Q2, furtherdriving down rent 1.5% q-o-q on average. In contrast, investment picked up in Hong Kong and Taiwan in Q2,recording a q-o-q increase of 510% and 65%, respectively.

Despite reducedinvestment during the quarter, over the first half of the year investmentamounted to RMB125.8 billion, edging up 3.3% y-o-y. In particular, Singaporeaninvestors have been increasingly active and have invested a total of RMB43.5billion in mainland China over the last 18 months, significantly above the10-year average of roughly RMB5 billion per year. Investors from Hong Kong, theU.S. and Canada also have been reasonably active over the past year.

Francis Li, Head of Capital Markets, Greater China at Cushman &Wakefield, mentioned, "Many investors with dry powder ready to deployare actively looking for quality assets at the right price with the rightreturn. Recently, we noticed that there is a 10-20% price gap between buyer'sand seller's expectation which leads to prolonged deal negotiation andfinalization. Going forward, as there is an increasing amount of tradeableassets flowing onto the market, we expect price to soften in the second half ofthis year. Currently, cap rates are hitting historical low and with theexpected price drop in the near term will likely lead to improved returns overtime. Additionally, quality assets at prime location are increasingly soughtafter by large foreign institutional investors with deep pocket. Once primeassets or a portfolio of asset are available for sale, we shall expectinvestment volume to come back again."

James Shepherd, Head of Research, Asia Pacific at Cushman &Wakefield, said: "For many market participants, it has been achallenging first half of the year. The U.S.-China trade dispute continues toweigh heavily on sentiment. Absorption of commercial premises all but stalledthe previous quarter, albeit levels came back sharply in Q2 as a certain amountof pent up demand was released. Despite this recent flurry of leasing activity,we forecast that the remainder of 2019 will see softer demand than in recentyears. Nevertheless, the mainland Chinese economy is proving more resilientthan some suggest, and stimulus measures are already showing signs of offeringsome relief."

Investment activitypicked up in core Tier-2 cities such as Tianjin and Chengdu. Both citiesrecorded large retail investment deals in Q2 totaling RMB7.9 billion and 2.2billion in Q2, respectively. In addition to ARA's recent JV investment inChengdu's Atrium Mall, Blackstone expects to complete its acquisition ofTaubman's CityOn portfolio this year, with two of the three retail propertieslocated in Xi'an and Zhengzhou.

Catherine Chen, Head of Forecasting & Capital Markets Research,Greater China at Cushman & Wakefield, said: "Benefiting frompopulation growth and rising disposable incomes, shopping centers in primelocations of some Tier-2 cities are increasingly attractive to both domesticand foreign investors. In addition, logistics properties remained highlysought-after given the sector outlook, restrictions on land availability andslightly higher cap rates in comparison to the office sector. Logistics grossyields for high quality facilities typically range from 5% to 6.5% acrossmainland China."

Notable logisticstransactions in Q2 included ICBC's purchase of three Yupei logistics parks inShenyang, Wuxi and Zhengzhou for a combined consideration of RMB755.3 million.In addition, e-commerce giant JD.com recently established a JD LogisticsProperties Core Fund together with Singapore's sovereign wealth fund with atotal committed capital of RMB4.8 billion. The fund expects to complete thepurchase of logistics facilities from JD Property Management (JDPM) for RMB10.9billion before the end of this year.

Chen added, "An increasing number of municipal governments areenforcing 'minimum tax requirements' (already effective in cities such asShanghai, Nanjing, Suzhou and Hangzhou) on newly acquired logistics sites,suggesting these new logistics centers may take longer time to lease up aslandlords become selective as they seek tenants that can meet the minimum taxrequirements."

Shepherd added, "We anticipate a strong infrastructureinvestment drive through 2019 and 2020. Coupled with massive forecastemployment in China's tertiary industry, especially in Tier-1 and core Tier-2cities between 2019 and 2021, this will support the expansion of MainlandChina's commercial real estate market."

According to OxfordEconomics, between 2019 and 2021 mainland China's Tier-1 cities are forecast toadd over 1.2 million jobs, the lion's share of which is projected for thetertiary sector.

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About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is a leading globalreal estate services firm that delivers exceptional value for real estateoccupiers and owners. Cushman & Wakefield is among the largest real estateservices firms with 51,000 employees in approximately 400 offices and 70countries. Across Greater China, there are 22 offices servicing the localmarket. The company won four of the top awards in the Euromoney Survey 2017& 2018 in the categories of Overall, Agency Letting/Sales, Valuation andResearch in China. In 2018, the firm had revenue of $8.2 billion across coreservices of property, facilities and project management, leasing, capitalmarkets, advisory and other services. To learn more, visit www.cushmanwakefield.com.hk or follow us onLinkedIn (https://www.linkedin.com/company/cushman-&-wakefield-greater-china)