China - Commercial Real Estate

China - Commercial Real Estate

Postby winston » Fri Feb 12, 2010 3:46 pm

This is starting to become a major risk so I'm starting a new thread to track this issue.

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Beijing Seen Vacant for 50% Commercial as Chanos Predicts Crash

Feb. 12 (Bloomberg) -- Jack Rodman, who has made a career of selling soured property loans from Los Angeles to Tokyo, sees a crash looming in China. He keeps a slide show on his computer of empty office buildings in Beijing, his home since 2002. The tally: 55, with another dozen candidates.

“I took these pictures to try to impress upon these people the massive amount of oversupply,” said Rodman, 63, president of Global Distressed Solutions LLC, which advises private equity and hedge funds on Chinese property and banking. Rodman figures about half of the city’s commercial space is vacant, more than was leased in Germany’s five biggest office markets in 2009.

Beijing’s office vacancy rate of 22.4 percent in the third quarter of last year was the ninth-highest of 103 markets tracked by CB Richard Ellis Group Inc., a real estate broker. Those figures don’t include many buildings about to open, such as the city’s tallest, the 6.6-billion yuan ($965 million) 74- story China World Tower 3.

Empty buildings are sprouting across China as companies with access to some of the $1.4 trillion in new loans last year build skyscrapers. Former Morgan Stanley chief Asia economist Andy Xie and hedge fund manager James Chanos say the country’s property market is in a bubble.

“There’s a monumental property bubble and fixed-asset investment bubble that China has underway right now,” Chanos said in a Jan. 25 Bloomberg Television interview. “And deflating that gently will be difficult at best.”

Third Costliest

Investor concerns have spread beyond real estate. Among 15 major Asian markets, the benchmark Shanghai Composite Index is valued third-highest relative to estimates for this year’s earnings, after Japan and India, even after falling 8.5 percent in the past six months.

A glut of factories in China is “wreaking far-reaching damage on the global economy,” stoking trade tensions and raising the risk of bad loans, the European Union Chamber of Commerce in China said in November.

More than 60 percent of investors surveyed by Bloomberg on Jan. 19 said they viewed China as a bubble, and three in 10 said it posed the greatest downside risk. The quarterly poll interviewed a random sample of 873 Bloomberg subscribers and had a margin of error of 3.3 percentage points.

Digesting the debt from a popped property bubble may slash bank lending and drag growth lower for years in an economy that Nomura Holdings Inc., Japan’s biggest brokerage, says will provide more than a third of world growth in 2010.

The risks are so great that a decade of little or no growth, as Japan experienced in the 1990s, can’t be dismissed, said Patrick Chovanec, an associate professor in the School of Economics and Management at Beijing’s Tsinghua University, ranked China’s top university by the Times newspaper in London.

“You have state-owned enterprises using borrowed funds from the stimulus bidding up the price of land -- not even desirable plots of land -- in Beijing to astronomical rates,” Chovanec said. “At the same time you have 30 percent-plus vacancy rates and slumping rents in commercial property so it’s just a case of when you recognize the losses -- or don’t.”

“The liquidity bubble last year went to the property market,” said Taizo Ishida, San Francisco-based lead manager for the $212-million Matthews Asia Pacific Fund, in a phone interview. “I was in Shanghai and Shenzhen three weeks ago and the prices were just eye-popping, just really amazing. Generally I’m not buying Chinese stocks.”

The commercial property space under construction in China at the end of November was the equivalent of 6,800 Burj Khalifas -- the 160-story Dubai skyscraper that’s the world’s tallest.

It’s difficult to determine how exposed Chinese banks are to real estate debt because loans booked to some state-owned companies as industrial lending may have been used to invest in property, say Xie and Charlene Chu, who analyzes Chinese banks for London-based Fitch Ratings Ltd. in Beijing.

A downturn in the property market may be accompanied by a surge in nonperforming loans. The Shanghai office of the banking regulatory commission said on Feb. 4 that a 10 percent fall in property values would triple the ratio of delinquent mortgages there.

"For us, non-performing loans are not expected to be a big issue until 2013, the peak of the current economic cycle,” said Zeng, head of Greenwoods Asset Management Ltd.’s Hong Kong office, in a phone interview. He declined to say what he is buying. Greenwoods has more than $500 million under management.

CB Richard Ellis doesn’t count empty office buildings bought by banks and insurance companies when calculating vacancy rates, since some of the space is for the owners’ use. The Los Angeles-based company said in a report that vacancy rates are starting to fall and rents to rise for the best office buildings as China’s fast economic growth buoys demand.

“In many cases when you look at these buildings and say, that’s never going to be fully occupied, somehow 12 to 18 months later the building is full,” said Chris Brooke, CB Richard Ellis’s Beijing-based president and chief executive officer for Asia.

Overcapacity may be looming in manufacturing as well. China’s investments in new factories and properties surged 67 percent last year to 15.2 trillion yuan, more than Russia’s gross domestic product.

While neither Xie nor Chu see nonperforming loan ratios reaching the level of a decade ago, when they made up 40 percent of total lending, they say banks will see deterioration in their balance sheets.

Losing Money?

“A lot of people will lose a lot of money, but the banks will probably not go down like in the 1990s,” Xie said in a phone interview. “Of course there will be a lot of bad debts. There will be a lot of mortgages gone bad I think.”

Rodman displays the slide show to private equity and hedge fund clients brought in by banks such as Goldman Sachs Group Inc. at his office in eastern Beijing.

“China is the only place in the world that despite having more empty buildings than the rest of the world has yet to reflect those valuations on their balance sheet,” Rodman said.

Gazing south from the building that houses the Beijing headquarters of Goldman Sachs, UBS AG and JPMorgan Chase & Co., one of the first structures in the field of vision is a 17-story office tower at No. 9 Financial Street. Empty.

Farther along are the two 18-story towers of the Bank of Communications Co. complex. Dirt is gathering at the doors and the lobby is now a bicycle parking lot. A spokeswoman for the Shanghai-based lender didn’t return phone calls and emails.

More Offices

The supply of office buildings will continue to grow. Jones Lang LaSalle Inc., a Chicago-based real-estate company, estimates that about 1.2 million square meters (12.9 million square feet) of office space in Beijing will come on line this year, adding to the total stock of 9.2 million square meters.

The city government is driving growth regardless of the market. Financial Street Holding Co., whose biggest shareholder is the local municipal district, plans to build 1 million square meters of additional office space starting this year, and is talking to potential clients such as JPMorgan, said Lydia Wang, the company’s head of investor relations.

Across town, the district government is seeking to double the size of the city’s Central Business District, which already has the highest vacancy rate ever recorded in Beijing. It was 35 percent at the end of 2009, according to Jones Lang LaSalle.

All Rented

For its part, Beijing-based Financial Street Holdings has “100 percent” of its properties, which include the Ritz Carlton hotel and a shopping mall, rented out, Wang said. The empty buildings along Finance Street don’t belong to the company, which is 26.6 percent owned by the district government.

Zhong Rongming, deputy general manager of the Beijing- based China World Trade Center Co., which built China World Tower 3, said the company is “optimistic about 2010 prospects” given China’s accelerating economic growth. He said the new tower will include tenants such as Mitsui & Co. and the Asian Development Bank.

One new addition to Finance Street may give real estate boosters cause for concern. No. 8 Finance Street will be the headquarters for China Huarong Asset Management Corp.

The company’s mission: selling bad debt from banks.

http://www.bloomberg.com/apps/news?pid= ... K__QRxjnQM
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Re: China - Commercial Real Estate

Postby winston » Mon Feb 22, 2010 9:57 pm

Welcome To Beijing – A Real Estate Free-For-All Like No Other by Joshua M Brown

I'm not writing this post as a "Short China" thing, but man does this scare me away from building commodities and the related stocks names levered to them...

I've relayed a lot of these stats here already, but this morning I found a really excellent roundup of Chinese real estate bubble signs.

http://thereformedbroker.com/2010/02/21 ... -no-other/
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Re: China - Commercial Real Estate

Postby profittaker » Tue Feb 23, 2010 2:18 pm

Army of Shortist Coming to China Asset Market

中国资产市场:“空军”来啦

http://economy.caing.com/2010-02-23/100119554.html

with my clumsy translation below.. :lol:
---------------------------
After Chanos presented his research in early-Jan, Soros has recently changed his tone on Chinese Property market to cautious, Rogers has become downbeat on Chinese Property market, Chinese government raised bank reserved ratio.

The bubble is true, but it may take few years to burst, hence it is probably too early to go into short position. Some other catalyst are needed to trigger the burst.
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Re: China - Commercial Real Estate

Postby winston » Thu May 05, 2011 11:35 am

Not vested

DJ MARKET TALK: UOBKH Positive On China Commercial Property Plays

1043 [Dow Jones] UOB KayHian expects there will be growing interest in China commercial property plays because the sector is a shelter from the intensifying policy risks in the residential sector; it adds home purchase restrictions have channelled buyers from the residential to the commercial sector, supporting capital values.

It prefers stocks with high exposure to the commercial sector, exposure in the tier-1 cities, particularly Shanghai and Beijing, as the tier-2 cities suffer from ample supply but demand is untested.

It likes SOHO China (0410.HK) given its strong presence in tier-1 cities; it also likes GZI REIT (0405.HK) and Hui Xian REIT (87001.HK) with their respective 2011 yields of 6.8% and 4.5%.

SOHO is down 0.2% at HK$6.52, GZI REIT is flat at HK$4.06 and Hui Xian is down 0.8% at HK$4.87.

Source: Dow Jones Newswire
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Re: China - Commercial Real Estate

Postby winston » Fri Sep 14, 2012 8:31 am

DJ China Shopping Mall Boom Creates Glut, May Lead to Closures - Real Estate Executive By Esther Fung

SHANGHAI--A boom in shopping mall development in China has created a glut in some areas and may lead to closures, a senior executive from Singapore-based Perennial Real Estate said Thursday.

Some malls were built regardless of local market demand, and some are too big, Pua Seck Guan, executive chairman of Perennial Real Estate, said at an industry forum in Shanghai.

In recent years, local governments have been increasingly selling land parcels with requirements to include commercial space, leaving developers without a firm understanding of the market situation struggling with lower-than-expected returns, industry executives said.

Local governments competing with each other for stronger economic growth have propelled land sales and generated the boom in shopping mall development in the past five years, said Mr Pua.

Some developers have been able to sell both residential and office units, but have struggled to find the right tenants for the retail portion of their mixed-use projects, said Mr Pua.

What works for first-tier cities like Shanghai and Beijing won't have the same success in lower-tier cities, he said.

There may only be one or two centers in smaller cities and many consumers there are in the middle or low-to-middle income groups, he said.

"I've seen a lot of malls with top brands at entrances that deter mass market residents from entering. They feel that they don't belong to the place."


Source: Dow Jones & Company, Inc.
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Re: China - Commercial Real Estate

Postby winston » Mon Mar 04, 2013 8:00 pm

World's biggest mall a China 'ghost town' By Johan Nylander

New South China Mall in Guangdong Province opened in 2005.

With 5 million square feet of shopping area, the mall can accommodate 2,350 stores, making it the largest shopping center in the world in terms of leasable space -- more than twice the size of Mall of America, the biggest shopping center in the United States.


http://edition.cnn.com/2013/03/03/busin ... index.html
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Re: China - Commercial Real Estate

Postby winston » Sat Apr 13, 2013 5:42 am

Tier-2 Chinese cities facing glut of office space

Source: SCMP
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Re: China - Commercial Real Estate

Postby behappyalways » Thu Dec 12, 2013 1:59 pm

青岛大型广场人去楼空太恐怖 萧条如鬼城(高清)
http://www.wenxuecity.com/news/2013/12/11/2855872.html
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Re: China - Commercial Real Estate

Postby winston » Fri Apr 25, 2014 6:50 am

China a mall monster

China, especially Shanghai, has the largest amount of shopping area under construction in the world, a survey by international property consultants CBRE has found.

In fact, eight out of the top 10 most active cities are in China, it said yesterday. CBRE surveyed 180 countries. About 9.8 million square meters of new retail space were opened in 2013 globally and a further 39 million sq m was under construction.

http://www.thestandard.com.hk/news_deta ... 40425&fc=8
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Re: China - Commercial Real Estate

Postby winston » Tue Jul 01, 2014 5:49 am

China’s latest “ghost city” could blow your mind

Source: Bloomberg

http://thecrux.com/forget-what-youve-he ... cking-yet/
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