Categorized | Commercial

Commercial Real Estate Bubble Likely in China

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Some parts of China are becoming increasingly vulnerable to a bubble according to many economists and developers. The bubble is expected to form as developers change their focus from the residential real estate market to the commercial real estate market. The residential market has drastically underperformed largely due in part to heavy restrictions set in place by the Chinese government.

With the residential real estate market in check, developers have had no choice but to migrate to the commercial property market in order to stay afloat. As such, there has been an abundance of new office and retail properties in recent months. The growth has taken place in big and small cities alike.

The heavy increase in the construction of these commercial properties will likely create a bubble, as supply will likely exceed demand. As such, the actions that the government has taken to prevent a housing market bubble are creating one in the commercial market.

While growth in the commercial real estate market is certainly a good thing, the problem being seen with this increase in properties being developed is that they are all popping up in the same area. Those cities with an increase in commercial real estate development have seen similar kinds of properties being built around one another. As such, economists are asking the question as to whether or not there will be enough consumers to go around. If not, the market could be facing a fairly significant bubble in the future.

After more than a year of struggle, many developers simply aren’t worried or even thinking about the future impact of the increase in commercial real estate properties.

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About Nancy Raven

Nancy is the main writer for the International section of the website. Sometimes she also helps Drew out on the Finance/Mortgage section as well.

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