Housing might be struggling in China but there are green shoots in commercial property

Commercial property is a bright spot in the Chinese real estate market.

Despite softer demand, office, warehouses, and business parks are still turning over steady rental revenue.

Earnings from rents from offices and other commercial property rose in the first half of the year despite revenue from housing development and sales in China falling.

For the first half of the year, home sales in China fell by 23%, but property investment revenue rose.

Vice Chairman Adriel Chan called it a pleasant surprise when Hang Lung Properties reported a small lift in its first half profits. The company reported lower revenue from malls and hotels due to the swine flu.

The office did well for us. About 20% of our mainland China revenue is now accounted for by it. It has been able to bounce back. I am aware that not everyone has had the same experience. In late July, Chan said that they would continue to look at offices.

Occupancy rates at Hang Lung's office towers continued to rise, despite dim prospects of new rentals, while levels in other parts of the country held up.

Nicholas Spiro of Lauressa Advisory said that Chinese commercial property investors and their tenants don't face the same difficulties as their residential counterparts.

The crisis of confidence in the housing market has hit the commercial sector hard. Spiro said that the commercial sector supports government and fiscal policies.

While Beijing is seeking to deflate the bubble in the residential market without crashing the economy, it is prioritizing investment in infrastructure and the new economy, which benefits the industrial and logistics property sector in particular.

Spiro said that Beijing is trying to deflate the bubble in the residential market without crashing the economy by investing in infrastructure.

There is room for growth in China's commercial sector.

Chinese companies have conservative mindsets that make changes to working patterns more problematic than in the U.S. and U.K.

Chinese authorities have a number of direct schemes to help landlords, such as reducing urban land use taxes and providing subsidies to landlords.

Despite China's Covid-zero policy, global real estate investor Hines sees rising demand for retail and office space as businesses look to open offices or lease space in a down market.

Retailers are using the current market reset to experiment with new brand concepts.

Tenants are looking to upgrade to better locations and more modern work environments.

The Chinese commercial property sector is able to rebound quicker than the residential sector.

Between the first and second quarters of this year, new office supply and rentals fell by 50% and 75%, respectively.

Fixed asset investment data for the first five months of 2022 showed real estate investment declined at a greater scale than it did during the first four months of the year. Pictured here on May 16 is a development in Huai’an City in Jiangsu province in east China.

Rents fell in 18 markets tracked by CB Richard Ellis. The firm's rental index fell in the second quarter.

In the second quarter of this year, retail lease rentals plummeted from the previous quarter and from a year ago.

Logistics lifted rentals in the second quarter, but were down compared with the previous year.

After government incentives kicked in, the commercial sector rebounded even more. The commercial sector is expected to do well for the remainder of the year.

The recovery will come from demand from tenants in the financial, technology, media and telecom and life sciences sectors.

The epidemic has been dealt with by the central and local governments in China.

The investment research firm said last month that China's commercial property sales have slowed.

Compared to the housing market, deal recovery is stronger in the commercial property market as there are many players who are unaffected by financing restrictions still looking to buy and sell assets.

The biggest buyer this year was domestic institutions. Insurance-backed players, banks and financial groups were among the biggest buyers of commercial real estate.

The corporates made a big splash last year, and have been relatively active in the years to come.