Greater Bay Area Initiative to Propel Real Estate Investment into Guangzhou and Shenzhen to New Highs

June 05, 2019 - 07:56
Greater Bay Area Initiative to Propel Real Estate Investment into Guangzhou and Shenzhen to New Highs

  • A strongpick-up in investment interest in the GBA with interest narrowly focusing inGuangzhou and Shenzhen since the announcement of the initiative in 2017
  • Combinedtransaction volume in Guangzhou and Shenzhen amounted to a second record highof RMB 54.6 billion in 2018
  • Foreignreal estate investment has more than doubled to RMB 5.2 billion in 2018, fromRMB 2.2 billion in 2014.  

HONG KONG, CHINA - Media OutReach - 5 June 2019 - A rising tide ofreal estate investment into Guangzhou and Shenzhen is being fueled by the Guangdong-HongKong-Macao Greater Bay Area (GBA) initiative according to Promise and Potential: RealEstate Investment Trends in the Greater Bay Area , a recently released report by Cushman & Wakefield.

Nearly two years after the initial announcement of anambitious plan to transform the GBA, consisting of nine Guangdong Provincecities and two Special Administrative Regions (Hong Kong and Macao) into aglobal economic powerhouse, the Central Government followed through in formallyreleasing a blueprint for the region in February 2019. While the blueprint didnot offer much in the way of new details, it was nonetheless welcomed as asignal of the government's continued commitment to drive economic growth in thearea. And despite the lengthy wait for the blueprint, investor and developerinterest in the region has steadily grown in the past two years since theinitial announcement. 

While real estate is not a key feature of theGBA plan, its successful implementation clearly has major implications for thesector, from the creation of commercial nodes supported by new transportationlinks to growing commercial demand supported by new industries and rising incomes.

The growth potentialin the GBA has resulted in a strong pick-up in investment interest in the areain the period since the announcement of the initiative in early 2017. However,that interest has been narrowly focused in Guangzhou and Shenzhen given thematurity of their economies, close proximity to Hong Kong and the presence ofhigh-quality commercial assets. In 2018 alone, combined transaction volume inthe two cities amounted to RMB 54.6 billion, the second highest on record(after RMB 57.5 billion in 2017) and more than three times the RMB 17.5 billionrecorded in 2016, prior to the announcement of the initiative

Real EstateInvestment in Guangzhou and Shenzhen

As the investmentmarket in the GBA has heated up, it has attracted a growing number of foreigninvestors. Since 2014, investment into properties valued at more than RMB 100million each by foreign investors in Guangzhou and Shenzhen has more thandoubled to RMB 5.2 billion in 2018, from RMB 2.2 billion in 2014.

MrReed Hatcher, Director and Head of Research, Hong Kong at Cushman &Wakefield, commented, "Improving inter-city transportconnectivity, along with strong underlying fundamentals in Guangzhou and Shenzhenand growth prospects arising from the ambitious GBA initiative, has attracted anumber of Hong Kong and foreign PERE funds looking for suitable real estateopportunities in the two Tier-1 cities."

The strong investmentdemand from foreign investors seen in 2018 continued into the first quarter of2019 with the combined foreign consideration in the two cities amounting to RMB7.5 billion, about a little over half of the record high in 2012.

Among all assetclasses, office and retail properties are unsurprisingly the two most soughtafter by foreign investors, accounting for 40% and 25%, respectively, of thetotal number of foreign transactions over the past 10 years.

This report alsoexamined and identified respective opportunities in the two Tier-1 cities basedon three investment strategies, namely Core/Core-Plus, Value-Added andOpportunistic. Looking ahead, investment activity from foreign investors isexpected to increase further, competing directly with domestic players -- whohave been a dominant force on their home turf -- for suitable commercialinvestment properties.

PotentialOpportunities by Investment Strategies in Guangzhou and Shenzhen

MrAlvin Yip, Cushman & Wakefield's President of Capital Markets, GreaterChina and Head of Capital Markets, China, said, "We expect tosee more foreign PERE funds to enter the investment markets of Guangzhou andShenzhen given their strong economic fundamentals and proximity to Hong Kong.Competition are likely to intensify as both foreign and domestic players arescrambling for investment opportunities especially within the commercial assetclasses."

For investors anddevelopers who are interested in investing in the two Tier-1 cities, Cushman& Wakefield recommends an early evaluation of the current opportunities andimplementation of appropriate real estate strategies.

Click here for the full report.

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 21 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 or follow us on LinkedIn(