Interest in alternative real estate heating up in China: ANREV China Conference 2018

Real estate investors in Asia Pacific are showing growing appetite for alternative sectors in China, with real estate classes such as senior housing, multifamily units, data centers and real estate debt all set to benefit, according to panelists and attendees at this year’s ANREV China Conference.

With commercial and residential assets in many of China’s largest cities at record prices, the conference discussed the opportunities and challenges arising from alternative real estate sectors, which will not only offer value for investors, but also connect them with changing trends in Chinese consumption, the needs of the millennial workforce and the expanding digital economy.

Opening the conference in Shanghai, Dr. Henry Chin, head of research Asia Pacific at CBRE, pointed to the rapidly growing “sharing economy” in China, which is monetizing excess capacity in the market, as well as fueling new services and solutions and offering new opportunities in the alternative real estate space.

He said, “Landlords need to adapt to the requirements of present and prospective occupiers. This means that real estate assets need to be enhanced, with more focus placed on the end users and data as opposed to costs. With working habits changing rapidly in China and globally, property owners need to be attuned to how the next generation wish to work by making workspaces flexible and technology-friendly. The emphasis needs to be on the user experience.”

Technological innovation in China is a continuing theme for real estate investors in the region. One panelist remarked that such is the extent of the use of technology and industry innovation that Chinese consumers are far more worried about the loss of their mobile phones than their own wallet, as smartphones can do everything from work and social messages to payments.  However, the challenges of integrating technology into a traditional property model are significant. Data will be a major part of changing this model and partnerships with technology providers will be crucial.

Data centers are an area that has attracted rising interest among Asia-based real estate investors, although it was acknowledged that there are barriers to getting into the sector, most notably around backbone infrastructure optimization — meaning it is essential to know client/end-user requirements. It was also noted that there is major supply/demand mismatch in this space.

Delegates also expressed notable optimism about car parks as an alternative sector. With 270 million cars on the road in China today, there is in fact only 0.5 parking spaces for every one car, compared with 1.2 in other cities around the world. It was agreed there were strong opportunities in this space as the government looks to liberalize the sector, meaning that pricing is likely to fuel higher returns and allow room for asset enhancement strategies.

“The conference unveiled the changing nature of China’s economic growth and highlighted the ways that real estate investors in China, and around the world, can benefit from new economic and social trends, as epitomized by the alternative real estate sector,” said Alan Dalgleish, chief executive of ANREV. “With a record turnout of more than 120 investors, fund managers and service providers around the region, the attendance at this year’s conference shows solid and continued confidence in the Chinese market. We were pleased to once again host a large and diverse group of established industry players, and to provide this important and independent platform for the real estate industry to share their insights and current thinking on this prominent market.”