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Performances from this quarter provided signs that the property market may see a slight recovery towards the end of the year, but rebound will not be strong as supply and demand returned while pricing remain unchanged.• Office – Domestic firm dominate demand as vacancy rates edge slowly decline• Retail – Tianjin’s largest shopping center opens in 3Q12.• High-end Residential – Continued slightly lowered price and active supply boost market absorption.Office- Domestic firm dominate demand as vacancy rates edge slowly declineFor the fourth consecutive quarter, there were no new office buildings completed in Tianjin. Starting from next year, we expect to see more office buildings completed in central Tianjin, especially in the Haihe River submarket and along Nanjing Road. This space will be a combination of Grade A and Grade B office space with much of the latter being sold to strata title buyers. Many headlines have been made of the large supply to be completed in the Binhai New Area. However, from its physical location and demand characteristics, we continue to maintain that the Binhai New Area have limited impact on the central Tianjin market. With no new supply and modest leasing activity, vacancy rates edged lower during the quarter to 15% for the overall office market and 26% for the Grade A office sector. Most Grade A office buildings are over 95% occupied, but a block of vacant space in the Tianjin World Financial Center (TWFC) continues to skew the overall market statistics because of its large size.Although Shanghai and Beijing have seen significant take up from MNCs, foreign firms in Tianjin have been less active recently. Local firms dominated the market in Q3 and leased space in Grade A and Grade B buildings owned by professional landlords. The Ningtai Building in Nankai district and the Tianjin World Financial Centre (TWFC) in Heping district were popular with tenants during the quarter. With two new subway lines opening in Q3, we expect office locations with nearby subway access will be increasingly in high demand. The leasing demand during the quarter pushed overall rents up to RMB 4.2 per sqm per day; Grade A office rents at RMB 5.0 per sqm per day remained unchanged. Retail – Galaxy International Shopping Centre opens In September, the 235,000 sqm Galaxy International Shopping Center, developed by Tianjin Infrastructure Investment Group opened in Hexi District. The project was part of a larger cultural center featuring public facilities including the Tianjin Grand Theater and several museums. The middle to high-end positioned centre was anchored by a Lotte Department store, OSGH Cinemas and All Star Skating Club. Additionally, the Exchange Mall on Nanjing Road re-opened in September after having been closed in May 2012 for refurbishment and tenant upgrades.Cumulatively, Tianjin overall retail sales have maintained its momentum with overall values higher year-on-year. However, individual retail projects’ annual sales rate is at a slower pace than 2011 due to economic influences. However, retail developers remain confident in the Tianjin retail market and are continuing to open projects at full or low vacancy rates. Even with the addition of Galaxy Mall and the re-opening of The Exchange Center, vacancy rates were only 3% in 3Q12.Galaxy Shopping Mall proved popular with retailers and leased to prominent tenants including GUCCI, PRADA and Tiffany & Co. The center also was home to brands new to Tianjin, such as miu miu, Balenciaga and Giorgio Armani. In addition to fashion the store featured a large F&B selection including the third South Beauty in Tianjin, Asia Table, Fai Gor Seafood Hot Pot Restaurant as well as Couture which are new entrants to the Tianjin market. The center is also home to Tianjin’s first Toy’s R Us. The Exchange Mall introduced new fashion brands, such as GUESS and Miss Sixty, the mall also now provides more F&B choices to draw foot traffic including the first Lotus Thai Restaurant and the second Bellagio Restaurant in Tianjin.High-end Residential Market – Supply and demand remain high, with no rebound in pricesEncouraged by the high sales volume in the Tianjin high-end residential market in 2Q12, multiple developers launched new projects in 3Q12, keeping the supply of high-end residential property at a considerably strong level. The influx of six projects in the quarter added about 1,280 units to the market. Beijing Financial Street Holdings introduced Financial Street Center, the only low-density townhouse product in Central Tianjin, to the market in 3Q12. Kerry Group launched its first residential project in the city, Tianjin Arcadia Courts (the residential portion of the Kerry Centre along the Haihe River), in 3Q12. As the first high-end residential property in South Station CBD of Hedong district, it is expected to promote the further development of this area in the future. The Rongqiao Group launched its townhouse in the quarter, following in the footsteps of its previous high-rise products. Glorious Palace, Diamond Hill and Magnificent also added supplementary units in 3Q12.Tianjin high-end residential market demand remained strong with 1,500 units sold. Sales rate in 3Q12 reached 36% keeping the same level as 2Q12, which was historically high for the Tianjin residential market. Reduced interest rates as well as good product motivated buyers. Projects with good brands and supporting facilities have sold well. For example, two projects by Financial Street Holdings -- Financial Street Center in Nankai District and the Metropolitan in Heping District -- sold a total of nearly 400 residential units; Yanlord Riverside Plaza along with Yanlord Riviera by the Yanlord Group also shared16% of the market transaction volume. The four projects by these two major developers accounted for over 40% of total market share.Sales prices in the Tianjin high-end residential market averaged RMB 20,900 per sqm in 3Q12, continuing the downward trend with a fall of 3% y-o-y.
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