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News Release


Strong Local Demand Boosts Revival of Tianjin Property Market

Market watchers have been looking to China to show signs of economic recovery and China watchers have been looking at Tianjin as an early indicator that the market has its worst days behind it. “Long term, Tianjin still has a few supply issues to confront, but the property market, particularly the retail and residential sectors, has given us some reasons for confidence,” noted Michael Hart, Jones Lang LaSalle’s Managing Director for Tianjin. The price of high-end residential rose rapidly in 3Q09, and ended almost at the same level as it had been in more than a year ago. Transaction volume was also up slightly compared to 2Q09. “Domestic consumption of automobile, electronics and other products boosted the manufacturing industry, which generated demand for warehouse space,” he also mentioned.
Office - Tenant Mix Diversified
In 3Q09, the average gross rental of Grade A properties in Tianjin reached RMB 4.85 per sqm per day, an increase of 1.7% q-o-q. This is the first increase recorded in four quarters. The rising rental was mainly attributed to increasing transacted rentals in the Exchange Tower 2. Considering the limited Grade A office supply in Tianjin planned for 2010, we believe that there is room for further growth in Grade A office rentals.
Traditional industries of office users continue to absorb office space. An international financial firm located its first Tianjin office in the Exchange Tower 2 this quarter. This new banking entrant rented 624 sqm. “Aside from financial institutions, a number of non-mainstream office users from other industries are emerging, such as local construction and investment companies,” said Lv Weiran, Associate Director of Markets at Jones Lang LaSalle Tianjin. Tianjin Municipal Investment Company, which is committed to the city’s infrastructure development, leased 1,055 sqm in the newly completed Tianjin City Tower. Meanwhile, Chuangfeng Investment relocated to the same project, occupying 425 sqm of space.
The vacancy rate of Grade A office buildings fell 0.9% to 19.1% in 3Q09. While average vacancy rate of Grade B offices increased to 20.5%, up 2.0% q-o-q, mainly due to new completions.
Several of Tianjin’s small trading, shipping, and logistics companies that had relocated to cheaper office buildings moved back to higher-quality office buildings as their business began to recover. In addition, pent up demand from tenants who were hesitant to enter or expand in Tianjin as a result of the global economy are expected to benefit the market in the following months as the market recovers further.
Retail - International Retailers Resume Expansion
Following a slow start in leasing activity in the first half of 2009, various international retailers are speeding up their expansion in Tianjin in 3Q09. After Lotte Department Store signed an agreement to anchor in Yanlord Riverside Plaza, which is scheduled to open in 2011, the supermarket arm and fast food arm of Lotte group, namely Lotte Mart and Lotteria, also opened in the city. Tianjin International Plaza along Nanjing Road replaced Maison Mode, which had pulled out of the city with a number of new retailers. Casual retailer UNIQLO from Japan made its debut on the first floor of this project, leasing 1,300 sqm. 7-Eleven opened two stores in the major retail catchments of Heping district, one in Xiaobailou and the other on Rongye Avenue. 7-Eleven showed its ambition for Tianjin earlier this year by announcing that it plans to invest RMB 70 million in Tianjin to open 200 stores in the next several years.
Future projects will be key in shaping Tianjin’s retail market. These include Joy City, which is being developed by the COFCO group. The project, which is currently under construction and scheduled for operation in 2012, recently secured a key anchor tenant in Thailand’s Central Department Store. This is in addition to Jinyi International Cinemas, which signed a lease agreement with Joy City in August.
The only new completion for 3Q09 was Jinwan Plaza Phase I in Financial City. This 171,000-sqm retail project, which faces the Tianjin train station, was developed by Tianjin Chengtou Group. The project, located along the Haihe River, is comprised of six low-rise buildings. The area has received support from the municipal government and it is hoped that it will provide a key recreation venue for this area.
High-end Residential - Price Rising Rapidly
Residential prices, which started to rebound in 2Q09, continued to climb as the average prices of high-end residential properties in Tianjin increased 7.9% q-o-q to reach RMB 13,360 per sqm in the third quarter. Essentially, all developers have raised their prices given the strong housing demand. Meanwhile, rentals for high-end residential ended their slide and increased 2.3% over the last quarter, reaching RMB 42 per sqm per month.
The transaction volume of high-end residential properties in 3Q09 reached nearly 1,300, which was even slightly higher than the last quarter. Several projects that are adjacent to mature commercial areas achieved good transaction volume with high price. The newly launched Yanlord Riverside Plaza Phase I in Tianjin’s Old Town Area delivered 250 fit-out units, all of which were sold out in just several days. Another new project on Nanjing Road, Golden Class, which added 795 core-and-shell units to the market, also achieved a good transaction record. In addition, the most expensive high-end residential project in town, Tianjin World Financial Center Apartment, sold 217 units this quarter. These three projects contributed more than half of the total high-end transaction volume in 3Q09.
Logistics - Domestic Consumption Accelerates Logistics Recovery
Two non-bonded projects, Blogis (Tianjin) Logistics Center in Tanggu Marine Hi-Tech Development Area and GLP AIP Logistics Center Phase II in Tianjin Airport Industrial Park, were completed in 3Q09, delivering 177,000 sqm to the market. As a result, the overall vacancy rate rose to 39%, up 7% from 2Q09. These projects have seen healthy demand, with Blogis pre-leasing space to Vestas in the second quarter. Aside from these two new projects, other existing warehouses enjoyed lower vacancy rate compared with the last quarter. Vacancy rate of bonded properties witnessed a decline for the third straight quarter after a significant rise at the end of 2008.
Domestic consumption has boosted the manufacturing industry, which generates demand for warehouse space, including electronics, fast-moving consumer goods, and particularly, automobile-related industries. For example, Sankyu Logistics from Japan, the service provider for Denso, expanded by another 10,000 sqm in GLP Park Xiqing.
Rentals, which had seen several quarters of declines, are now experiencing more stability. The average rental in 3Q09 was at RMB 0.78 per sqm per day, the same as last quarter. International investors and developers had been very conservative since the slump earlier, but they are now actively looking for opportunities in Tianjin. More investment deals are expected to close in 2010.