CBRE has released the China Real Estate MarketView Q1 2012 recently. According to this report, during the first quarter of 2012, office rents in China basically maintained continued growth. Beijing has been leading the group with an impressive 10.6% q-o-q rent growth, while for Tianjin, Qingdao, Guangzhou, Chengdu, and Chongqing, the vacancy rates stayed at a relatively high level, and growth was limited due to a large new supply.

In the residential market, the price signals have further reflected the ripple effect of government regulations. The average price of luxury apartments declined slightly in all the fifteen China cities included in the report during the first quarter except for Shenyang, which enjoyed an astonishing price increase. The retail market remained active. The rents of some cities dropped, due to rental improvements in new CBDs and the opening of new projects, but most of the fifteen cities surveyed witnessed a stable upward trend. The rapidly developing e-commerce and logistics sector have been generating constant new demand for logistic facilities, and rents for logistics facilities saw a widespread q-o-q increase in all of the cities.

During the Q1 2012, we saw diverse market performance of all 5 Northern cities. Beijing led the group with a surprising 10.6% q-o-q rent growth. The vacancy rate also dropped to a historical low of 5%. Shenyang and Qingdao are experiencing market upgrades with decent rent growth, 2.7% and 6.7% q-o-q respectively. However, in Tianjin and Dalian, growth was limited. Large new supply exerted pressure on several markets such as Tianjin and Qingdao, both having their vacancy rate stay at a relatively high level of 17.7% and 15.2% respectively.

The ripple effect of government regulations on the residential market has been further witnessed for most of the Northern China markets. In this quarter, most Northern cities had limited price changes of luxury apartments. As an exception, Shenyang enjoyed an astonishing price increase of 8.2% q-o-q, most coming from high quality new projects. Dalian had a substantial price drop of 1.9% q-o-q, substantially more than most other cities. In the leasing market, rental growth for luxury apartments was registered in all markets, of which Beijing had the largest apartment rental growth of 2.4% q-o-q.

The retail market remained active for all 5 Northern cities. New projects opened in most of the markets, limiting the market average rental growth. Tianjin and Beijing were the two markets that were affected by this large amount of new supply and had vacancy surging to 13.5% and 12.6% respectively. Within the period under review, except a minor rental decrease in Shenyang, rents have increased for all other cities within a range of 0.5% to 1.2% q-o-q.

The rapidly developing e-commerce and logistic sector have been generating constant new demand for logistic facilities. The active land and leasing transactions have demonstrated the promising future of the logistics property market. During the 1st quarter of 2012, logistics rents in all five cities of north China showed q-o-q increases from 0.4% to 2.4%. Meanwhile, new industrial space has been undersupplied, with rents pushed up, such as in Shenyang, where the rent for industrial space has increased 4.4% q-o-q.