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Services sector real estate expands in China, despite GDP slow down

​​​28 January​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ 2015

Services sector real estate expands in China, despite GDP slow down


Economic growth in the world's second largest economy has slowed to a 24-year low but some sectors are benefiting from China's 'new normal', according to JLL.

Last week, new figures showed that China's economy missed its official annual growth target of 7.5 percent for the first time in 15 years, hitting a 24-year low of 7.4 percent. While this is down from 7.7 percent in 2013, it came in ahead of the expected 7.2 percent for Q4 2014.

Despite the property market reaching its slowest pace since the first half of 2009, some sectors are benefiting from the government's cooling measures.

"The real estate industry is benefiting from the fact that the services sector is the fastest growing part of the economy – and this is aligned with the government's plans," said Michael Klibaner, Head of Research, Greater China, JLL.

"Slower growth is a necessary and expected outcome of the reforms that are being implemented and of the rebalancing from investment to consumption in the broader economy that is taking place," he added.

The growth in the financial services sector, for example, is fuelling demand for office space in China's major cities.  Others sectors, too, remain strong.

"In spite of the apparent slowdown in headline GDP growth, retail sales growth has held up quite well and the increasing size of the middle class continues to present huge opportunities in the retail sector," said Klibaner.

China's 30 biggest retail cities housed 775 malls at the end of 2014 and this will increase to 1,196 by 2016. The popularity of online shopping is also growing at an unprecedented rate. "Ecommerce has continued to grow faster in China than anywhere else in the world and this provides substantial demand for the logistics real estate market."

As the nation's economic focus shifts toward the 'quality' of growth rather than strictly the pace of growth, China's GDP growth is set to slow further in 2015, says Klibaner.

"The global economy will need to adapt to what the government is calling China's 'new normal'.

"The aspects of China's economy that support commercial real estate can best be characterised by structural changes, which are long term in nature and still very much in place."​​