CICC: Industrial park REITs valuation shows signs of stabilization and recovery trend.

China International Capital Corporation (CICC) released a research report stating that as of the end of November 2024, there were 12 listed industrial park REITs in China, with a total market value exceeding 20 billion yuan, accounting for 15.5% of the total market value, showing a feature of "more quantity, smaller individual size". In reviewing the performance of industrial park REITs in the secondary market over the past three years, the fluctuation in fundamentals was the main factor influencing the valuation adjustment of industrial park REITs. This year, after undergoing sufficient valuation adjustments and some projects showing signs of stabilizing operations, the valuation of industrial park REITs has shown signs of stabilization and recovery. Overall, the fundamentals of industrial park projects are basically bottoming out, and valuations may already be in a suitable range, possessing medium to long-term investment value. Evaluation of industrial parks from three dimensions CICC believes that a good industrial park can create value for both the government and enterprises: on one hand, enterprises can achieve production factor intensification by settling in the park and better achieve their business goals; on the other hand, the government can enhance regional economic competitiveness and increase financial revenue by promoting enterprise and industrial aggregation, forming a positive cycle of reinvestment and regional development. Under the above constraints, three major dimensions are used to assess the advantages of industrial park assets: industrial location (belonging to the category of economic geography), competitive situation, and operational capability. At present, industrial park assets in China are still in the liquidation stage. On the supply side, the supply of commercial parks in Beijing and Shanghai is different, with the Beijing market possibly having passed the short-term supply peak, while the Shanghai market is still at a high level. Overall, the demand side is still relatively weak, and the net absorption of commercial parks in Beijing and Shanghai has not shown clear signs of recovery. In terms of demand structure, there is relatively strong demand for leasing in core cities in industries such as TMT, pharmaceuticals and life sciences, and manufacturing. In the current macroeconomic and supply-demand situation, owners of industrial parks generally adopt a strategy of trading price for quantity, leading to a slight decrease in market rental prices. In terms of asset prices, the capitalization rate of commercial parks monitored has risen slightly, now close to that of Grade A office buildings in non-core areas. Overall, industrial park assets are still in the liquidation stage at present, but with the slowing down of the supply of industrial parks and the recent introduction of a package of policies by the government to support stable economic growth, the supply-demand pressure of industrial parks is expected to gradually ease. Risk factors: risks from changes in the macroeconomic environment; increased industry competition; risks from policy adjustments.