What is causing china's real estate glut?

Photo: Kattebelletje

A report by CBRE recently found that Chinese cities account for more than half of the mall space currently under construction around the world. Chengdu is heart of the retail proeprty boom, with a million square metres of mall space opening last year, not to mention hotels, offices and other developments in the area.

Knight Frank found that 800 mixed-use complexes are being built across China, despite the fact that almost two-thirds of luxury retailers found they expanded into fewer new stores than planned in China during 2013; a sign that slowdown may soon leave developers with too much space to fill.

"The government hasn't realized that vacancy problems will be severe once all those projects are built," a spokesperson from Knight Frank told the WSJ.

What, then, is fuelling the construction race?

One professor tells CNTV that it is a growing appetite for investment, which is transforming the country's business model - not to mention the face of the country's skyline.

"It includes the introduction of the e-commerce model, and foreign commercial real estate operating models are coming into China, which also affects the transformation of Chinese business model. More and more new business districts have been built, and the old districts are facing elimination. This could be the reason behind the local commercial real estate glut," he commented.