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May 11, 2011, 11.58 AM IST | Source: CNBC

China's commercial realty boosted by property crackdown?

The series of property curbs rolled out by Beijing may have cooled residential house prices in China, but it has led to a surge of money into commercial real estate, according to global real estate services firm Jones Lang LaSalle.

China's commercial realty boosted by property crackdown?

The series of property curbs rolled out by Beijing may have cooled residential house prices in China, but it has led to a surge of money into commercial real estate, according to global real estate services firm Jones Lang LaSalle.

"There are lots of people who want to buy apartments as an investment who can`t. But they can buy commercial properties. So we are seeing a surge of money coming from what we believe is the residential investors into the commercial sector," Alastair Hughes, Asia-Pacific CEO of the firm told CNBC.

Even though Hughes noted that 20 million square feet of commercial property space is set to come online in Shanghai alone this year, he said there is enough demand to absorb the supply.

"State-owned enterprises, Chinese private companies, multinational corporations" everybody wants to be part of the Chinese growth story. So there is lots of supply but there is also lots of demand and rents are actually moving up."

Jones Lang LaSalle expects office-leasing demand to remain strong, with rents in China`s Tier-1 cities continuing to rise. The firm also foresees demand for retail space to remain firm, given the strong rebound in consumer confidence in March.

Not everyone agrees with Jones Lang LaSalle`s view. Shaun Rein, founder of the China Market Research Group, recently pointed out in a CNBC blog that there were too many ill-conceived retail centers clogging commercial space on the mainland.

"Too many developers don`t seem to understand the market can only sustain so many luxury complexes housing Louis Vuitton and Gucci boutiques," he wrote.

Rein argued that would eventually lead to an oversupply as more developers switch from residential to commercial property due to lower government controls on the latter.

Copyright 2011 cnbc.com

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