Gaw Capital sells Shanghai tower for $402m

Gaw Capital Partners has agreed to sell the Cross Tower, a 24-story commercial building in Shanghai, to World Union Investment Management, according to Mingtiandi.

Shanghai’s GDP increased 6.9 percent year-over-year in the first half of 2017 compared to 6.7 percent growth over the same period in 2016, according to Cushman & Wakefield. Service sector GDP dropped to 7 percent year-over-year growth during the second quarter while CPI edged down to 1.9 percent.

China Overseas International Center was completed during the third quarter, yielding 917,375 square feet of new class A office supply. Shanghai’s central CBD stock increased to approximately 71.8 million square feet at quarter’s end. Another completion was MixCII in Hongqiao Hub. The new office buildings raised Shanghai’s class stock above the 108 million square feet milestone. Significant new supply volume drove up the vacancy rate in the CBD to 11.6 percent, from 11 percent during the second quarter. Core Xuhui continued to hold the lowest vacancy rate among CBD submarkets at 6.3 percent.

Net absorption slid back to approximately 409,000 square feet in the central CBD in third quarter on weaker demand following three consecutive quarters of net absorption above 1.1 million square feet. Despite the recent slowdown, for the year net absorption has increased roughly 3.1 times over the same period in 2016. Notably, co-working enterprises remained aggressive and expanded their office presence in the city.

Office rent saw a modest increase on the whole despite the vacancy rate being on the rise. Class A CBD rent edged up 0.4 percent quarter-over-quarter to average $47.85 per square foot per month at the end of third quarter. Landlords of new buildings tended to raise office rent with confidence the market would remain active. By comparison, rent levels in older office buildings remained stable. Occupier demand from MNCs has gradually recovered since last year but continues to be influenced by a cost-saving strategy. Domestic occupiers on the other hand tend to prefer prime offices in core areas.

Class A CBD offices remain the favored target for investors due to a limited number of sellable properties. Capital values in class A CBD office buildings increased 0.4 percent quarter-over-quarter to average $12,540 per square foot during the third quarter. Market yields remained at 4.6 percent at the end of third quarter 2017.

Gaw Capital Partners has been active on the buying side this year. Link Real Estate Investment Trust agreed to sell some of its property assets to a consortium led by the private-equity firm for HK$23 billion ($2.95 billion).

Gaw Capital Partners also acquired the Sky SOHO Project, a group of class A office buildings in Shanghai developed by SOHO China for $445 million, and it acquired PoMo, a nine-story office and retail complex in central Singapore for $253 million.

And in April, Gaw Capital Partners reached a final closing of its fifth Greater China and Asia Pacific–focused real estate fund at its $1.3 billion hard cap.