Economy

US expert positive about China's commercial property market

(Xinhua)
Updated: 2011-05-20 13:18

Regarding the market outlook for insurance companies, Tse explained, "Insurance companies are long-term investors and real estate is an ideal asset class in which insurance companies can invest in the long term to match their long-term liabilities."

However, Tse sees missing links in China's commercial real estate market today.

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"Institutional investors, such as insurance companies, prefer stabilized assets with strong credit tenants. However, there are simply not that many tradable commercial real estate assets available in china for institutional investors to purchase," she said.

"So far in China, a limited number of buildings in Beijing and Shanghai are considered truly institutional investment grade quality. As a result, we have now seen some assets traded a few times over the past 1-2 years leading to substantial cap rates compressed in these assets," Tse told Xinhua.

The real estate expert also predicted that in the long-run, professional asset management will be needed in order to maintain or add value to the buildings, particularly.

She further explained the reasons behind, "China has seen a plethora of construction over the past 10-15 years and as a result many commercial properties in the country are still very new. Many of these new properties are well functioning and are not in need of intense asset management and regular maintenance."

"The concept of professional asset management has not yet expanded to property owners outside of those institutional grade buildings," she added.