Positive signals restore confidence in China's commercial real estate

Editor's note: Mi Yang is head of office research for JLL China and Ji Ming is director of JLL's China research team. The article reflects the authors' opinions and not necessarily the views of CGTN. 

According to China's 2024 government work report, the country's GDP growth this year is targeted at around 5 percent, same as last year. As the country continues to transform its development model, the target signals a firm stance and a proactive attitude to support growth, employment, and stability. 

Stable Employment

The report announced a targeted increase of another 12 million urban jobs to maintain an urban unemployment rate of around 5.5 percent, matching the goals of last year. In 2023, China created 12.44 million urban jobs and reported an average unemployment rate of 5.2 percent. Therefore, we consider the latest employment targets to be necessary and pragmatic. 

Since late January, China has launched a "Spring Breeze" campaign to offer around 30 million job opportunities across industries by early April, in a bid to start the year with a stable employment and business environment. A robust job market and steady income growth will fundamentally improve consumption willingness in the long term, maintaining momentum in various commercial real estate markets including retail, hotel, and tourism-related properties.

New quality productive forces

The report underscored China's continuing efforts to promote the development of the innovation and technology system in order to upgrade the manufacturing sector as well as the economic structure, tap into new quality productive forces, boost total factor productivity, and improve competitiveness. Key strategic emerging industries include biotechnology, new materials, new energy, electric vehicles, and artificial intelligence. Specifically, export of "the new three" – electric vehicles, lithium-ion batteries, and solar cells – surged nearly 30 percent year on year in 2023, and is expected to continue supporting China's industrial upgrading and economic resilience.

Advanced technology sectors and hard-tech industries have shown promising upsides in commercial real estate sector, supported by favorable policy measures. The development of such industries is anticipated to mostly benefit industrial properties and business parks, while top players are likely to gradually upgrade to prime office buildings.

Consumption growth

China also emphasized supporting and expanding domestic consumption to drive growth, as consumption contributed 82.5 percent to overall GDP growth in 2023. China reported strong consumption growth over the recently concluded Spring Festival holiday, despite the high base effects from the reopening boost in early 2023. Following the further improvement of market sentiment and a firmer revival of demand, many retailers sought to open new stores and expand their physical presence in the market, while leading retail asset operators raised their revenue expectations.

Real estate support

The report reaffirmed a focus on containing property sector risks. China aimed to refine supportive policies and meet reasonable funding needs of developers, to promote a healthy and stable development of the sector. In the first two months of 2024, authorities had already announced a range of measures to boost housing sales on the demand side, and to ease liquidity and ensure completions on the supply side, which includes the record 25-basis-points cut to the five-year LPR and the launch of a whitelist mechanism for cash-strapped housing projects.

It is believed that timely release and effective implementation of housing measures will provide certainty to compliant developers and quality assets, and increase market confidence. Alongside a more sustainable growth of the residential housing market, this will also help commercial and industrial real estate sectors to guard against risks, as well as encourage key players to chase after high-quality opportunities for investment and development.