Morgan Stanley to Spend Over $2 Billion on Shanghai Commercial Property

Strategic Insights -

Morgan Stanley's real estate arm plans to make a significant investment in Shanghai, acquiring a prime commercial property project worth over $2 billion as part of a broader buying spree on the mainland. The move follows the opening of a new branch in Shanghai, which signals the company's intention to increase its acquisitions in the region. Sources close to the deal suggest that Morgan Stanley is seeking partnerships with domestic investment firms and the Shanghai government's property arm to facilitate the transaction.

Key Takeaways:

  • Morgan Stanley's real estate arm is set to spend over $2 billion on a prime commercial property project in Shanghai, with the deal expected to be announced soon.
  • The investment is part of a broader buying spree on the mainland, with a total budget of $3 billion.
  • Morgan Stanley is seeking partnerships with domestic investment firms, including Anderson Land, and the Shanghai government's property arm to facilitate the acquisition.
  • Over the past five years, Morgan Stanley has invested $1.5 billion in Chinese real estate.
  • The company's senior manager, David Yang, expects the value of deals this year to exceed that of last year, driven by the active buying of grade-A office properties by foreign funds.
  • Average prices for prime office buildings in Shanghai are around $4,000 per square metre.
  • Institutional funds, such as Morgan Stanley, are a major buying force in the investment market, with a focus on acquiring existing buildings with rental income or redevelopment potential.

Statistics:

  • Total sales for entire buildings in Shanghai exceeded 6.5 billion yuan, with over 320,000 square metres of total gross floor space changing hands last year (DTZ).
  • Four to five transactions, each worth $100 million, were closed in the first quarter of this year, according to Remy Chan, Jones Lang LaSalle national director for China.
  • New supply in the Shanghai grade-A office market will drop by almost 50% to 245,000 square metres, from 450,000 square metres a year ago (DTZ).
  • Average grade office rents will continue to rise due to limited supply, according to DTZ.

Sources:

  • Sources close to the deal
  • David Yang, senior manager of CB Richard Ellis's investment department in Shanghai
  • Remy Chan, Jones Lang LaSalle national director for China
  • DTZ, property consultant
  • Official communications from Morgan Stanley