For months and months, my law firm had not been involved in a single China commercial real estate deal. Not one. Sure, we assisted a foreigner or two in buying (or selling) a condo in which to live, but nothing at all on the investment front.
Now, just in the last month, we are in the midst of a number of such deals (for a number of clients old and new) and I read the news and the news says commercial property (retail, office, industrial, etc.) is not selling in China. And I know all real estate is local, but our new deals are in cities where the news clearly applies.
All our new deals involve foreigners taking out very long term leases (rather than “buying”) office buildings in need of renovation in great locations. All these deals involve fairly small buildings (certainly small by China standards) owned by Chinese developers who want out. Our clients are small to mid-sized foreign developers who have their “own people” standing by to do the work necessary to renovate and upgrade these buildings (for between $3 and $8 million) and all have already lined up some foreign businesses that want to move in. The plan is to rent out space to at reasonable rates to foreign companies that want nice space (but not top of the line) in a great location, with a reliable landlord.
Is this an uptick in the market, a trend, or an anomaly? Is this a sign of an uptick, or just companies carving out a previously underexploited niche?
I am not sure why this is happening now. When I ask the China lawyers in my firm working on these deals (I myself have not dealt directly with the clients on these), the response I get is something along the lines of “good opportunities to make a decent return.”
But why now? Is real estate in China reaching a bottom? Are Chinese property owners needing to sell (I should say lease out for the long term)? Are Chinese property owners realizing they need to price their properties at today’s prices and by their doing so sales (long term leases) are being stimulated?
What is going on out there?
For a comprehensive overview on China’s real estate laws go here.