Update | Softer office markets cloud China property outlook
Despite strong first-half gains, Soho China and Franshion face challenges when the slowing economy pressures rents in Beijing and Shanghai
Commercial property developers Soho China and Franshion Properties (China) posted robust half-year results yesterday, but their major office markets in Beijing and Shanghai are expected to soften as the mainland's economic growth slows further.
Soho, the largest developer of offices in those cities, said underlying profit, excluding property revaluation gains, surged 130 per cent to 537 million yuan (HK$680 million) year on year on strong property sales.
The firm has been moving from a "build to sell" strategy to "build to hold" since August last year. Its first project available for leasing, Soho Century Plaza in Shanghai's Pudong district, is fully occupied. About 60 per cent of the office space at Galaxy Soho in Beijing has been leased since it was launched early this year.
Chairman Pan Shiyi warned, however, of headwinds.
We see land Offices at Galaxy Soho are about 60 per cent occupied. Photo: AP prices trending up, further squeezing yield on properties
"We see land prices trending up, further squeezing yield on properties since early this year. These high asset prices are not sustainable without enormous rental growth," he said. "In the current market environment, there is no clear indication of economic revitalisation or expectation of strong rental growth."
But Pan said the government would likely release clear economic policies in the next few months. He said Soho would take a prudent attitude to future acquisitions.
