Foreign investors continued their retreat from China's commercial real estate market in 2024, marking the fourth consecutive year of net sales. The ongoing deflationary pressures and higher global borrowing costs diminished prospects for capital gains, prompting a significant reduction in foreign investment. According to MSCI, foreign investors purchased US$5.9 billion in office, hotel, industrial, and retail properties in 2024, the lowest level since 2014. During the same period, they sold US$6.9 billion in assets, resulting in a net selling of US$969 million for the year.
Over the past four years, the cumulative outflows totalled US$11.2 billion, surpassing the net inflows of the previous two years. Since the onset of the COVID-19 pandemic in 2020, global funds have predominantly been net sellers, except industrial assets.
The office property sector, once a key investment choice due to China's rapid economic growth, has been particularly affected. Vacancy rates have increased as new office supply has outpaced demand, putting downward pressure on occupancy and rental prices. Investors have become more cautious since interest rates began to rise in late 2022, with many opting to hold off on acquisitions until market values stabilise.
Blackstone and other major investors have been among the notable sellers. Blackstone offloaded three logistics projects in the Greater Bay Area, while the Canada Pension Plan Investment Board sold its stake in four shopping complexes. The divestment trend continued as offshore investors, facing debt challenges, sought to sell mainland assets. For instance, Hong Kong's Parkview Group listed its Fang Cao Di commercial complex in Beijing, and BlackRock's fund surrendered two office complexes in Shanghai after defaulting on a loan.
Analysts indicate that a market recovery remains unlikely in the near future due to weak market liquidity, falling investment, and the broader macroeconomic slowdown. The Chinese government has introduced economic support measures, including a substantial increase in special treasury bonds to boost consumption. However, a supply glut in the office space sector is expected to delay any improvement in the operating environment, with vacancy rates likely to increase further.
