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The View | China’s property recovery is fragile, but ignoring it is a mistake

PressNewsAgency
By PressNewsAgency

Global commercial real estate investment markets are roaring back to life. In the first half of this year, direct investment in commercial property rose 27 per cent in annualised terms. The sharpest increase was in the Asia-Pacific, where transaction volumes were up 38 per cent to US$92.5 billion, the strongest half-yearly performance on record, according to data from JLL.

While there have been many positive surprises in Asian real estate since the eruption of the Covid-19 pandemic, the publication of data last week showing that mainland China was the most actively traded commercial real estate market in the first half of this year is one of the most striking.
According to MSCI, transaction volumes in China rose 103 per cent to US$28 billion, slightly more than in Japan, the region’s best-performing commercial property market. While the data for China was flattered by the relatively low volume of deals in the first half of 2025, investment activity was still 24 per cent higher than the average level for the first half of the year since 2021.

China is now the fastest-growing commercial property investment market in the Asia-Pacific. However, a sharp rebound from a low base is one thing, a recovery based on solid foundations is quite another.

Despite its strong performance, mainland China is not in the same league as Japan. First, many of the deals this year were disposals, often involving the recapitalisation of developers’ commercial properties. Overseas investors were net sellers, disposing of US$11 billion worth of assets, accounting for 40 per cent of total investment activity in the first half of this year, according to MSCI data.

Moreover, demand is driven by domestic buyers, particularly owner-occupiers. In Shanghai, self-use demand accounted for 45 per cent of transactions in the second quarter, which JLL said “reflects corporates’ strategic tendency to lower long-term operating costs through property acquisitions”.

Mount Fuji is silhouetted during sunset behind the high-rise buildings of the Shinjuku area in downtown Tokyo on November 20, 2023. Photo: AFP

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