Beijing**Client|Reporter Cao Zheng.
Recently, CBRE released a special report on "Commercial Real Estate Trends and Opportunities in China's High-Quality Economic Development". According to the report, the new engine of shifting gears and improving quality has led to a structural change in commercial real estate demand. Among them, strategic emerging industries have become the main force of incremental demand for high-quality office buildings and R&D facilities, especially in first- and second-tier cities with rich human resources.
Xie Chen, head of CBRE China's research department, said that in 2023, China's economy will gradually recover, but it still faces internal and external challenges. Under the wave of technological innovation and consumption upgrading, corporate strategies and residents' consumption behaviors are changing.
In the context of China's economic innovation and upgrading, the rise of strategic emerging industries such as a new generation of information technology, biotechnology, and high-end equipment manufacturing has accelerated. Different from the traditional manufacturing industry, strategic emerging industries are highly intellectual, technology, and capital-intensive, so high-quality office and R&D space occupy a more important position in their work scenarios. According to CBRE, strategic emerging companies accounted for 24 percent of the country's new office leasing transactions in 20196% to the current 325%, accounting for more than 70% of the Beijing-Shanghai business park.
The trajectory of office location in strategic emerging industries is highly consistent with the distribution of human resources. According to the data, since 2019, 84% of the newly leased office area of strategic emerging industries has been located in the seven major cities of Beijing, Shanghai, Chengdu, Shenzhen, Guangzhou, Wuhan and Xi'an. Among them, Beijing and Shanghai maintained an absolute lead, accounting for more than half of the newly leased area.
In addition, the increasing emphasis on the quality of office space is another important structural trend in the context of high-quality development. In the first three quarters of this year, the net absorption of Grade A office buildings in 18 major cities across the country recorded a record high of 97%.In first-tier cities, the crowding out effect of Grade A buildings on Grade B buildings is more obvious.
At the same time, the life science park is one of the areas with the best fit between industrial real estate and high-quality economic development, and the underlying logic of its investment is inseparable from the demographic trend of China's aging and consumption upgrading at one end, and the other end is inseparable from the innovation and upgrading of domestic industries.
Expanding R&D spending has boosted demand for R&D properties. Comparing the performance of CBRE's Beijing-Shanghai life sciences properties with other R&D facilities since 2020, CBRE found that the former has a clear advantage in terms of rental growth and occupancy growth. In addition to strong fundamentals, life sciences R&D facilities often have strong tenant stickiness due to high barriers to entry in terms of building codes, environmental assessments, industry permits, and equipment investment.
In terms of brick-and-mortar retail, the rapid flow of offline consumers after the optimization of epidemic prevention and control measures** shows that brick-and-mortar stores still play an irreplaceable role in the omni-channel retail chain. Brick-and-mortar stores are rapidly transforming into integrated places that integrate consumption, service, experience and social attributes. CBRE believes that "quality" is more important than "quantity", experience-driven sales and community building will be important directions for retail brands to strengthen their physical store networks in the future. According to **, the cumulative growth rate of offline retail operating area in China will reach 94%, handbags and luggage, sports health, leisure and beauty related to quality of life will show stronger growth.
In addition, consumer infrastructure REITs are expected to further activate bulk investment in retail properties. In March 2023, China's public REITs pilot was expanded again, and consumer infrastructure, including shopping malls, department stores, and farmers' markets, was included in the underlying assets. Up to now, 4 consumer infrastructure REITs have been officially approved or in the process of acceptance.