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April 28, 2016

Commercial real estate investment in China had a record year in 2015, with the total value of transacted assets reaching approximately RMB 150 billion. It is just the latest sign of torrid growth in the country’s commercial property investment market. The total size of China’s institutionally invested real estate universe in 2015 was estimated to be second only to that of the U.S. at approximately US$800 billion.

Behind rising transaction volumes lies the growing prominence of domestic money. Domestic capital has accounted for the lion’s share of investment in China’s commercial real estate for much of the past decade, and comprised three-quarters of activity in 2015. This means that domestic investment has driven most of the uplift in transaction volumes, all while expanding Introduction strongly itself with a compound annual growth rate of 15.4 percent over the past eight years. Domestic capital’s rapid growth has, in turn, been supported by a range of savvy actors including private equity funds, corporates, state-owned enterprises (SOEs) and insurance firms.

Given the escalating size of China’s real estate investment universe and improving market transparency, investment activity is set to expand further in the years to come. Foreign investors will no doubt continue to increase their footprints across China, but it will be domestic players that still provide the greatest contribution. JLL believes that the following five trends will pave the way for domestic investors to carry on driving investment volumes to structurally higher levels.

  1. SOEs are poised to become significant sellers in the market
  2. Chinese insurers are likely to emerge as some of the largest buyers domestically and globally
  3. Chinese private equity funds will expand their footprints
  4. Securitisation is set to catalyse the next wave of investment activities
  5. Innovative methods will supplement mainstream investment channels

The JLL China team

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