Annual Report Observation | China Merchants Commercial Real Estate Investment Trust 2025: Office Buildings, Garden City, and Hong Kong Acquisitions

Guandian.com On March 17, China Merchants Commercial Real Estate Trust disclosed its full-year performance announcement for 2025.

As background, the commercial real estate market in 2025 remains turbulent, especially in the office leasing sector, which faces pressure on occupancy rates and rents, along with the impact of high supply levels leading to increased competition. This is a comprehensive test of asset quality, management capability, and strategic resilience.

In terms of performance, China Merchants Commercial REIT’s total revenue for 2025 was 432 million yuan, with net property income of 307 million yuan, and distributable income of 96.3 million yuan. During the period, the company maintained a 100% distribution ratio, with each fund unit distributing 0.0968 HKD.

Specifically, the underlying assets of China Merchants Commercial REIT include five office properties and one retail property, focusing on core areas in Shenzhen and Beijing.

As of the end of the period, the overall occupancy rate of the property portfolio remained at 80.8%. Notably, the Grade A office building New Era Plaza in Shekou, Shenzhen, saw a 9.7 percentage point increase in occupancy to 66.1%, thanks to signing several high-quality tenants at year-end.

The retail property, Shenzhen China Merchants Garden City, showed countercyclical growth, becoming the most eye-catching highlight of this performance report. During the period, its occupancy rate rose to 96.5%, with annual rental income reaching 88.51 million yuan, a 10.1% increase year-over-year, demonstrating strong vitality amid the consumer recovery wave.

Business Structure

Although revenue faced macroeconomic pressures, the health of the balance sheet and the ability to control financing costs became the core armor for China Merchants Commercial REIT to withstand market fluctuations.

Financial reports show that as of December 2025, the total borrowings of the REIT amounted to 4.108 billion yuan, with a healthy debt-to-asset ratio of 42.3%, below the 50% cap set by Hong Kong REIT regulations.

At the end of the period, total liabilities (excluding unitholders’ equity attributable to the fund) accounted for 55.9% of the fund’s total assets.

Additionally, property operating expenses and financing costs decreased by 13.8% and 11.3%, respectively. The reduction in financing costs mainly resulted from proactive measures by the manager during the year.

It is understood that as early as January 2025, the REIT completed a large-scale refinancing operation, signing a new 5-year loan agreement with a third-party bank through a wholly owned subsidiary, totaling 4.1 billion yuan with a fixed annual interest rate of 2.80%.

Subsequently, the fund quickly drew down 4.008 billion yuan, accounting for 97.5% of the total bank borrowings, to repay all higher-interest foreign debt early, saving substantial interest expenses. Simultaneously, due to the reduction of collateralized bank loans, the fund’s short-term liabilities decreased from 2.16 billion yuan to 505 million yuan.

The lower asset-liability ratio and stable capital structure also provide ample financial flexibility, enabling the fund to seize high-quality asset acquisition opportunities in the future.

In December 2025, China Merchants Commercial REIT facilitated the acquisition of its first student apartment project in Hong Kong.

The property was formerly Residence G Hotel (also reported as Hmlet Austin Avenue Hotel), located at 2 Kowloon Kersadon Road, Hong Kong (formerly 2-2A Kersadon Road). With a total floor area of approximately 23,600 square feet, it is adjacent to the Hong Kong Polytechnic University.

The REIT purchased it for HKD 206 million, representing a 3.3% discount to its valuation of HKD 213 million in November of the same year.

According to plans, the property will be transformed into a modern student dormitory with about 85 beds, with renovation expected to be completed by August 2026 and put into operation to align with the 2026/27 academic year in Hong Kong.

“This move will help further optimize the asset structure of the REIT and bring long-term sustainable value and returns to unitholders,” said China Merchants Commercial REIT.

In fact, during the performance meetings in early and mid-2025, the fund manager explicitly stated that in the next one or two years, the REIT plans to leverage debt to acquire more projects. The targets are not limited to commercial properties; any assets capable of generating returns for investors, including hotels, student apartments, etc., are under consideration.

“The first step might be smaller and more cautious, like student apartments, which could be a good target. We hope to have good news for everyone soon,” the fund manager said at the mid-year performance meeting in 2025.

And indeed, China Merchants Commercial REIT has fulfilled this promise.

Asset Operations

Shifting focus from financial reports to more granular asset management, the property portfolio of China Merchants Commercial REIT in 2025 showed a clear differentiation.

First, the retail property Shenzhen Shekou China Merchants Garden City remained a stable and growth driver throughout the year.

During the period, rental income from Shekou China Merchants Garden City increased by 10.1% to 88.51 million yuan, achieving positive growth. Despite a 3.2% decline in overall portfolio valuation, this property’s valuation rose by 2.1% to 1.517 billion yuan.

The occupancy rate at Shekou China Merchants Garden City also continued to rise, from 93.5% at the end of 2024 to 96.5%; rental rates increased from 121.7 yuan/m² mid-year to 122.3 yuan/m² at year-end.

This positive market feedback reflects the successful upgrades made to the property.

Data shows that Shekou China Merchants Garden City covers about 100,000 square meters, opened in 2006, and was the first shopping center in the Shekou area.

In September 2022, the mall underwent its largest renovation since opening. The upgrade redefined its positioning as a “urban lifestyle art hub,” with comprehensive updates to the exterior, interior spaces, and circulation routes.

Regarding branding, public information indicates that in 2025 alone, nearly 68 brands were adjusted or introduced, covering nearly 10,000 square meters. The project retained popular “old brands” through upgrades and expansions, while also introducing new trendy brands such as Anta PALACE, Luxi River flagship stores, and other emerging retail, dining, and lifestyle brands, including flagship stores in the city or region.

In contrast, the office building portfolio of China Merchants Commercial REIT faced challenges in 2025. External conditions in the Shenzhen and Beijing office markets inevitably affected the fund’s office projects.

Overall, although the average occupancy rate of the office portfolio declined at year-end, each project maintained healthy operations.

The China Merchants Hanghua Science and Technology Center in Beijing’s CBD core adopted a “price to volume, stabilize occupancy” strategy, successfully maintaining a high occupancy rate of 93.8%.

The Grade A office New Era Plaza in Shenzhen faced significant pressure early in the year, but management’s efforts in the second half led to signing several high-quality tenants, resulting in a substantial rebound of 9.7 percentage points in occupancy rate.

The three B-grade office properties in Shekou’s Wanggu—Science and Technology Building, Phase II of Science and Technology Building, and Digital Building—faced more complex situations during the year.

Science and Technology Building was affected by the departure of a major tenant, impacting most of its space. The project team responded by engaging multiple prospective tenants across healthcare, senior living, education, hospitality, and residential sectors to boost occupancy.

Meanwhile, Science and Technology Building Phase II and Digital Building were mainly impacted by the “crowding out effect” caused by declining rents in Grade A offices, leading to varying degrees of occupancy decline.

The manager has stated that targeted “one-on-one” strategies will be developed in 2026 to address these issues.