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

• A strong pick-up in investment interest in the GBA with interest narrowly focusing in Guangzhou and Shenzhen since the announcement of the initiative in 2017
• Combined transaction volume in Guangzhou and Shenzhen amounted to a second record high of RMB 54.6 billion in 2018
• Foreign real estate investment has more than doubled to RMB 5.2 billion in 2018, from RMB 2.2 billion in 2014.  

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

Nearly two years after the initial announcement of an ambitious plan to transform the GBA, consisting of nine Guangdong Province cities and two Special Administrative Regions (Hong Kong and Macao) into a global economic powerhouse, the Central Government followed through in formally releasing a blueprint for the region in February 2019. While the blueprint did not offer much in the way of new details, it was nonetheless welcomed as a signal of the government’s continued commitment to drive economic growth in the area. And despite the lengthy wait for the blueprint, investor and developer interest in the region has steadily grown in the past two years since the initial announcement. 

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

The growth potential in the GBA has resulted in a strong pick-up in investment interest in the area in the period since the announcement of the initiative in early 2017. However, that interest has been narrowly focused in Guangzhou and Shenzhen given the maturity of their economies, close proximity to Hong Kong and the presence of high-quality commercial assets. In 2018 alone, combined transaction volume in the 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 billion recorded in 2016, prior to the announcement of the initiative

Real Estate Investment in Guangzhou and Shenzhen

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

Mr Reed Hatcher, Director and Head of Research, Hong Kong at Cushman & Wakefield, commented, “Improving inter-city transport connectivity, along with strong underlying fundamentals in Guangzhou and Shenzhen and growth prospects arising from the ambitious GBA initiative, has attracted a number of Hong Kong and foreign PERE funds looking for suitable real estate opportunities in the two Tier-1 cities.”

The strong investment demand from foreign investors seen in 2018 continued into the first quarter of 2019 with the combined foreign consideration in the two cities amounting to RMB 7.5 billion, about a little over half of the record high in 2012.

Among all asset classes, office and retail properties are unsurprisingly the two most sought after by foreign investors, accounting for 40% and 25%, respectively, of the total number of foreign transactions over the past 10 years.

This report also examined and identified respective opportunities in the two Tier-1 cities based on three investment strategies, namely Core/Core-Plus, Value-Added and Opportunistic. Looking ahead, investment activity from foreign investors is expected to increase further, competing directly with domestic players — who have been a dominant force on their home turf — for suitable commercial investment properties.

Potential Opportunities by Investment Strategies in Guangzhou and Shenzhen

Mr Alvin Yip, Cushman & Wakefield’s President of Capital Markets, Greater China and Head of Capital Markets, China, said, “We expect to see more foreign PERE funds to enter the investment markets of Guangzhou and Shenzhen given their strong economic fundamentals and proximity to Hong Kong. Competition are likely to intensify as both foreign and domestic players are scrambling for investment opportunities especially within the commercial asset classes.”

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

Click here for the full report.