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News Release

Tianjin

Tianjin Commercial Property Market Turns Around, Residential Transaction Drops


“Market activity in the first quarter of 2010 has made us optimistic about Tianjin’s property market.  The commercial market has witnessed a strong demand in the office and some in the warehouse sector, while retail sales continued to grow at a rapid pace,” noted Michael Hart, Jones Lang LaSalle’s Managing Director for Tianjin. “We have seen the sales volume of high-end housing decline some in terms of volume, but only because residential prices continue to climb to new records.”
 
Office
 
Domestic tenants upgrading working environment – Although Tianjin has several massive office projects currently under construction, no new projects were completed in 1Q10. Meanwhile, the leased space of this quarter saw an obvious increase as compared to previous quarters, resulting in a decrease in the overall vacancy rate from 21.0% in 4Q09 to 18.0% in 1Q10. The gross rental was 3.4 per sqm per day, a slight decline of less than 2% q-o-q.
 
Not only did the business recovery in various industries help boost demand for office space, but the current low rental also attracted many domestic companies to take this opportunity to upgrade their working environment. More than 70% of this quarter’s leasing transactions were categorized as relocations to more prestigious projects, which was a significant rise as compared to the past.
 
“Demand scattered over different industries, and no specific industry stood out this quarter. Compared to cautious MNCs, domestics tenants turned out to be more active,” said Lv Weiran, Associate Director of Markets at Jones Lang LaSalle Tianjin.
 
The Tianjin Municipal Government has relocated from Heping district to Hexi district, which has generated additional office demand from government-related agencies in the Youyi Road area. Examples of these are the Tianjin Economic and Information Technology Commission as well as the Tianjin Agency Affairs Bureau, which leased a total of almost 10,000 sqm in Tianjin City Tower along Youyi Road.
 
Retail
 
Steady growth continues – Tianjin’s retail sector continues to show strong momentum in terms of both overall retail sales and the future pipeline of major retail projects. Total retail sales in 2009 reached RMB 243.1 billion, with an actual growth rate of 22.9%, a new record since 1994. Isetan maintained its position as having the high sales in 2009, reporting close to RMB 750 million of revenue. Two years after opening, Hisense Plaza has established its position in Tianjin’s high-end market with increasing sales and an impressive roster of brand names. Through its ongoing trade mix adjustments, the sales turnover of Robbinz Department Store also improved, narrowing its gap with market average.
 
Limited new supply is expected to enter the market during 2010, however several premium large-scale shopping centers currently under construction are in the pre-leasing stage with plans to open within the next three years. Announcements and the presence of new international anchors and other well-known retailers will be the main theme of Tianjin’s retail market, which are predicted to reshape the city’s retail industry. The first Japanese Yamada Denki in Tianjin, which is scheduled to open in August this year, has signed a leasing agreement with Tianjin Centre along Nanjing Road to occupy 32,000 sqm of the retail podium. Another Japan-based department store – Isetan will cooperate with local department store operator Jinyuanbao Group to open its second Tianjin Isetan Department Store, which is in the TEDA (Tianjin Economic-Technological Development Area) in Binhai New Area.
 
High-end Residential
 
Soaring prices restrain transaction volume –The high-end residential price has kept surging for the fifth straight quarter since bottoming out in early 2009. The price soared at the highest quarterly growth in the recent two years at 18% q-o-q or 43% y-o-y in 1Q10, reaching RMB 17,200 per sqm. All projects raised their sales price in 1Q10. Moreover, the average price growth reached more than RMB 2,500 per sqm.
 
As sales prices soared this quarter, developers became quite active in promoting their projects. Two high-end residential projects – Central of Glorious in Heping district and Yanlord Riverside Plaza in Nankai district – launched  915 fit-out units to the market.
 
The transaction volume of high-end residential properties declined from 1,137 units in 4Q09 to 676 units in 1Q10. On the one hand, the drop of the transaction volume was caused by the relatively limited available units in the market. On the other hand, the rapidly increasing sales price also temporarily restrained some purchasing power. Similar to the previous quarter, phase III of R&F City and Yanlord Riverside Plaza in the Old Town area continued to rank top two in terms of transaction volume. Hongze Impression in the Meijiang area also achieved good transaction volume. These three projects altogether sold 373 units in 1Q10, contributing more than 55% to the total transaction volume.
 
Logistics
 
Driven by domestic consumption – No new warehouses were completed this quarter; thus, logistics stock remained the same as that in 4Q10. The vacancy rates of both bonded and non-bonded properties have dropped, especially non-bonded ones. Nonetheless, the export market is not picking up as quickly as China’s domestic market. Due to these factors, majority of the tenants are prudent about expansion and are cost-sensitive. Rentals of both non-bonded and bonded warehouse remained unchanged from those in the last quarter. Therefore, the average rental rate stood at RMB 0.85 per sqm per day.
 
In 1Q10, the overall vacancy rate of primary warehouses in Tianjin fell to 32%, down by 5% as compared to that in the previous quarter. One of the biggest leasing deals of the quarter involved Taiwanese manufacturing company Ting Hsin International Group renting 3,800 sqm in Blogis (Tianjin) Logistics Center, which is located in the Tanggu Marine Hi-Tech Development Area. Sub-markets, such as East Port and the Tianjin Airport Economic Area, that have not yet matured obtained relatively high vacancy rates.
 
Investment
 
CapitaLand China Acquired Orient Overseas’ Portfolio – CapitaLand China (RE) Holdings signed an agreement with Orient Overseas on January 18, 2010 to purchase the entire 100% stake of Orient Overseas Developments Limited. Under this arrangement, CapitaLand will acquire a real estate business with a portfolio of seven sites located in Shanghai, Kunshan, and Tianjin for a purchase consideration of USD 2.2 billion. The projects have a total GFA of approximately 1.48 million sqm, about half of which is allocated for residential use and the remaining balance is divided among office, retail and serviced residences/hotel. Oujiahua International Trade Building in Xiaobailou area in Tianjin is also included in the portfolio. CapitaLand is expected to take advantage of its rich development experience and self-owned brands to redevelop this 190,350-sqm project as well as enhance and spur the commercial environment of the area.