Economic transition and commercial property cycles in China

Drawn from a recently completed study, this paper aims at a better understanding of commercial property cycles in the transitional economy of China. It examines the behaviour of the property submarket system in China and considers structural changes in the socio-economic system as a primary factor in addressing the research problem. The study suggests that the underlying social and economic structure has greatly determined market behaviour. It finds that radical changes can alter the formal structure (the designed structure) of the market system, including the property market structure, but cannot alter the informal structure (i.e. the emergent structure) at the similar rate. As the study shows, cycles in the commercial property market in the economic transition is largely a key resulting feature of the continuous structural change both at formal and informal levels in a way that is often imbalanced and not always consistently changing together. The same situation also applies to the transformation of inner-city built form, which is featured by a delayed change of physical building stock against the space demand trend that is underpinned by the socio-economic transition. Put simply, there is a supply lag, mainly in the form of changing land use and building stock replacement, against economic change (the business cycle). This affects the level of effective demand for office space and hence becomes a major force in shaping current office cycles.