BlackRock Sells All Shanghai Buildings at Bargain Prices
China's Prolonged Real Estate Slump Forces Foreign Investors to Exit
Experts Say "Full Market Recovery Unlikely Before 2026"
In China, which is suffering from an economic recession, a building in Shanghai has seen its price drop to one-third of the purchase price from eight years ago.
On the 29th, Yonhap News quoted Hong Kong's South China Morning Post (SCMP) reporting that BlackRock has put up for sale the Trinity Place building, its last real estate asset in Shanghai, for 900 million yuan (approximately 182.1 billion KRW). This is BlackRock's last real estate asset in Shanghai.
High-rise buildings in Shanghai, China (not directly related to the article content). Photo by EPA Yonhap News,
Earlier, last month, BlackRock had two office buildings in the Lujiazui Financial and Trade Zone in Pudong, Shanghai, seized by Standard Chartered due to unpaid loans.
When BlackRock purchased these office buildings in 2018, it took out a loan of 780 million yuan (157.8 billion KRW). The company tried to sell the office towers at a 30% discount from the purchase price but failed to sell them. These buildings are expected to be sold to DCL Investment, a distressed asset specialist firm, at a price 40% lower than the purchase price.
The Chinese real estate market has been in a prolonged slump due to tightened regulations on real estate developers implemented since the end of 2020 and the ongoing economic slowdown following COVID-19. The office vacancy rate in major Chinese cities is expected to exceed 20% this year, and office rents in key cities are anticipated to fall by about 10% compared to the previous year. At the beginning of this year, new housing starts in China decreased by approximately 30% year-on-year, and new housing prices have been declining for 21 consecutive months.
According to Morgan Stanley Capital International (MSCI), foreign investors have been net sellers of Chinese real estate for four consecutive years until last year, with purchase volumes at $5.9 billion (8.68 trillion KRW), the lowest level since 2014.
Ted Lee, Head of Capital Markets for North China at real estate consulting firm Savills, said, "Foreign investment in Chinese commercial real estate, especially office buildings, was active in 2017-2018. These assets are currently the most severely affected by falling rents and low occupancy rates, and the overall value of these assets is also declining."
Meanwhile, the Chinese government is introducing stimulus measures such as tax cuts as a desperate measure. At the end of last year, capital gains tax, which was 20% for homeowners selling a house they had lived in for more than five years, was completely exempted, and acquisition tax was significantly reduced from 3% to 1%. The government is encouraging commercial banks to lend to real estate companies and promoting reconstruction projects. However, Chinese real estate experts warned the media that "a full market recovery will not occur until after 2026."
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