CHINA Trends and Developments Contributed by: Zheyuan Jin, Xiang Mao and Lingyue Sun, Merits & Tree Law Offices
sector reached CNY300 million in January–February 2026, surging 5.6 times year-on-year. Office space has remained the most active segment for foreign investors. In March 2026, Shui On Land announced plans to form a joint venture with Manulife Financial and two other external partners via equity transfers and corporate restructuring to hold prime assets in Shanghai’s Huangpu District – specifically Corporate Avenue 5 and Lakeside Shopping Mall at the Taipingqiao (Xintiandi) site. In October 2025, Abu Dhabi Investment Authority (ADIA) jointly completed the acquisition of Bohua Plaza in Shanghai’s Jing’an District with ChinaPost Life Insurance, with a transac - tion value exceeding CNY10 billion. In the commercial complex segment, foreign inves - tors have targeted mature, cashflow-stable assets. In December 2025, IKEA China announced a joint hold - ing partnership with Gaohe Capital for three “gather - ing experience centres”: Wuxi Livat, Beijing Livat and Wuhan Livat; IKEA China will also open and operate a new store within Wuxi Livat. Foreign investors have also stepped into the high- end residential space. In February 2025, Singapore’s Kheng Leong Group, in a joint venture with Jinmao Holdings, secured a prime residential plot in Shang - hai’s Hongkou District for CNY8.964 billion. Foreign capital’s geographic allocation is highly polar - ised: investors focus exclusively on first-tier core cit - ies such as Shanghai and Beijing, as well as prime areas of strong second-tier cities in the Yangtze River Delta and Guangdong–Hong Kong–Macao Greater Bay Area. There is virtually no foreign investment in third- and fourth-tier cities. Diversification of Buyers in China’s Commercial Real Estate Market In recent years, the composition of market partici - pants in China’s real estate sector has undergone a fundamental restructuring. 2025 marked a critical year for retail commercial real estate, defined by valuation restructuring, major player reshuffling and structural divergence. High-quality, mature assets in prime busi - ness districts of first-tier and strong second-tier cities saw moderate discounts, delivered target yields and
presented bottom-fishing value; in contrast, inefficient assets in non-core areas still faced downward valua - tion pressure. Firstly, this shift in participants has triggered a change in the market’s dominant logic: a transition from “development and sales” to “holding and operations”. The traditional developer model of “high leverage, fast turnover” is no longer sustainable, while institutions with long-term capital and strong operational capabili - ties have become the backbone of the market. Vari - ous investment institutions and specialised industrial operators are acquiring existing assets, undertaking renovations and upgrades, and implementing refined operations to generate stable rental income and achieve asset appreciation. Secondly, state-owned capital is playing an increas - ingly significant role, evolving from “land suppliers” and “developers” towards “integrated platform oper - ators” and “rule co-ordinators”. Local state-owned enterprises are no longer merely transferring land use rights or engaging in primary development. Instead, they are frequently contributing land resources and existing assets as equity, proactively initiating or participating in the establishment of urban renewal funds and real estate funds. They have become key platforms for integrating resources, guiding planning and balancing public interests with market efficiency. Their relationship with market-oriented institutions has shifted from simple “buyer-seller” transactions to “partnerships”. Thirdly, there is a notable rise in specialised and pro - fessional institutions focusing on niche segments. The market no longer views “real estate” as a monolithic category, recognising that it has deeply segmented sectors, such as logistics and warehousing, indus - trial parks, long-term rental apartments, data centres, and life sciences real estate. In each vertical, expert institutions have emerged, possessing deep industrial knowledge, specialised fund management capabili - ties, and robust networks for leasing and operations. Finally, the collaborative relationships among mar - ket participants have evolved from simple “capital + development” alliances into complex ecosystems of “capital + industry + operations + content”. A suc -
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