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Beijing/Shanghai

Commercial Real Estate in China: the 50 Cities to Watch over the next decade

Jones Lang LaSalle issues China50: an in-depth study of future commercial real estate opportunities in China


Jones Lang LaSalle has released a new report <China50: Fifty Real Estate Markets that Matter> today, highlighting the opportunities for corporate property occupiers, real estate investors, developers, retailers and hotel operators in 50 secondary and tertiary cities across mainland China, the China50.
 
• 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. These cities are fast-tracking to maturity and, as large diversified open economies, they 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 sq. m of modern retail and nearly 30 million sq. m 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, and that significant opportunities will also exist in the logistics sector.
 

“Since we reported on China’s Tier 2 and 3 cities in 2009 in our China40 publication, the economic, business and real estate landscape in China has changed significantly, ” said KK Fung, managing director for Jones Lang LaSalle Greater China. “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.
 
The China50 report aims to provide strategic context for commercial real estate players who are keen to capture more opportunities beyond the familiar Tier I cities.” Michael Klibaner, head of research for Jones Lang LaSalle China noted: “Remarkably, these 50 cities combined are expected to account for 12% of overall global economic growth over the next decade. And China50 contains all of the world’s ten 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 sq. m 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.” noted Mr 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. 

KK Fung concluded:  “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.”