Commercial real estate in China: the 50 cities to watch over the next decade
Jones Lang LaSalle has released a new report, China50: Fifty Real Estate Markets that Matter, highlighting the opportunities for corporate property occupiers, real estate investors, developers, retailers and hotel operators in 50 secondary and tertiary cities across mainland China.
According to the report, nine cities, defined as Tier 1.5 Transitional Cities, have separated themselves from the pack: Chengdu, Chongqing, Dalian, Hangzhou, Nanjing, Shenyang, Suzhou, Tianjin and Wuhan. They are fast-tracking to maturity and, as large diversified open economies, are creating depth across multiple real estate sectors. Chengdu has emerged as the premier China50 real estate market; Chongqing, Shenyang and Tianjin have built up the strongest momentum. To keep pace with the phenomenal speed of economic growth, over 80 million square metres of modern retail and nearly 30 million square metres of Grade A offices will be built in China50’s main cities over the remainder of the decade, bringing much needed stock to the market.
Jones Lang LaSalle predicts that retail will provide the greatest real estate opportunity in China50 (a term coined by Jones Lang LaSalle), and that significant opportunities will also exist in the logistics sector. “The new China50 are being transformed at an unprecedented rate by the scale of building and by the progress of economic development. They are the cities that we believe will be hitting the headlines over the next decade and that will provide opportunities beyond the familiar Tier I cities,” said KK Fung, managing director for Jones Lang LaSalle Greater China.
Michael Klibaner, head of research for Jones Lang LaSalle China noted: “These 50 cities combined are expected to account for 12 per cent of overall global economic growth over the next decade and China50 contains all of the world’s 10 fastest growing large cities, led by Chongqing, Tianjin and Chengdu. These numbers are a clear signal that China50 is one of the world’s most exciting real estate opportunities.”
The development of over 100 million square metres of commercial space over the next decade is bringing much needed high-quality stock to these 50 cities. As developers move deeper into China50, it is also helping to support the expansion of domestic and international corporates, retailers and hotel operators across the China50, into Tier 3 cities as they tap into favourable demographics and seek ‘first mover’ advantage.
“As the volume of tradable property assets increases and transparency improves, institutional investor interest in commercial real estate in the China50 will increase. Their focus will be on the retail sector, which provides the largest real estate opportunity, driven by strong growth in China50’s middle class population, which is expected to double to over 125 million by the middle of the decade,” said Fung.
Significant opportunities also exist in the logistics sector where there is a severe under-provision of international grade stock; China’s total modern logistics stock is barely equally to that of Boston in the United States. Prospects for logistics will be further boosted by improving transport infrastructure, retail growth and a shift inland of China’s manufacturing base.
“The China50 offers a compelling long-term growth story, but the road to maturity is unlikely to be smooth and fears of excessive risk may lead to some caution in the property market over the short to medium term. They will not be immune from volatilities in the global economy, but importantly, some China50 cities, such as Chongqing, Wuhan and Xi’an may prove to be more resilient than most, underpinned by the structural growth of China’s domestic economy,” said Fung.
The China50 report is available at www.joneslanglasalle.com/China50Cities