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News Release


New office and retail supply are improving Tianjin’s real estate market

According to JLL Tianjin’s 3Q14 Property Review

Tianjin, October 29, 2014 – JLL's 3Q14 property review revealed the following:

  • Office – Metropolitan Tower Tianjin brings new Grade A supply
  • Logistics – Leasing demand forecast to increase
  • Retail – Tianjin's retail environment is improving. Riverside 66 and Florentia Village Phase II open
  • High-end residential – Housing demand picks up


The majority of leasing demand during the quarter was from firms engaged in service sector activities, such as finance and professional services. Domestic companies continue to lead leasing demand, as MNCs have had limited leasing requirements for the past few quarters. Notable leasing transactions were by the domestic financial firm Gao Xiang, which leased more than 1,000 sqm in Tianjin World Financial Center, and by TeeMall, which took up 1,100 sqm in Ocean Shipping Plaza.

Despite leasing activity from service sector firms remaining relatively robust during 3Q14, overall net take-up declined.  In 3Q14, office net take-up declined 60% q-o-q to 25,000 sqm. One catalyst behind the poor net absorption numbers was negative net take-up in the Grade A market. Net absorption in the Grade A market was -5,000 sqm, primarily because several firms moved from Tianjin World Financial Center. Michael Hart, Managing Director at JLL Tianjin, commented, "Even though demand has been down this quarter, we do not expect this trend to continue, as the economic fundamentals are still strong in Tianjin and we still see firms looking to expand and upgrade to better office buildings."

More office buildings were completed in 3Q14. There was one Grade A building, Metropolitan Tower Tianjin, and three Grade B office towers, Tianjin Wanda Center, The Esplanade Offices and Meijiang Center Plaza, completed in 3Q14, increasing the city's office stock by 230,000 sqm to 1.7 million sqm (GFA). The new Grade A office building, which is located along Nanjing Road, has already seen strong levels of demand and is expected to increase competition among landlords in Tianjin's Grade A office market. However, rents in the market have yet to be impacted by the new supply, as they remained stable.

District governments are determined to have better quality office towers built in their districts and are trying to attract office tenants to these new buildings. With the quality of the office towers in Tianjin improving each year, competition for tenants is heating up. Recently, Vantone Center, which is a future Grade A office tower that JLL has been appointed to lease, opened its show suite in Xiaobailou, exemplifying the amount of new competition in the city. Lv Weiran, Head of Markets at JLL Tianjin, said, "When Vantone Center enters the market it will be first Grade A office tower in Xiaobailou and have superior building specifications. Vantone Center already has LEED Gold precertification and will accommodate firms looking for environmentally friendly options."

As more office buildings are constructed in Tianjin, the city's office market is forecast to turn tenant favorable. Mr. Hart stated, "Metropolitan Tower Tianjin developed by Hutchison Whampoa Property and the development of office towers by Vantone, CapitaLand and R&F are helping to bring Tianjin's office market to the level of first tier cities and giving office tenants significantly more choices in locations to establish new offices."


No new supply was completed in the bonded or non-bonded markets in 3Q14. Developers have not been in a rush to complete projects, despite vacancy rates declining in the market and demand remaining static. Developers are looking to increase their pre-leasing levels before completing any new projects. By the end of 2014, three new projects are expected to be completed, all in the non-bonded market, totalling approximately 230,000 sqm. No new bonded projects are expected to enter the market until 2015. The pipeline for bonded projects is limited compared with non-bonded projects, primarily because bonded projects tend to be located around the seaport and airport, where land for warehouses is scarce. Non-bonded warehouse land is still available in many of the outlining districts of Tianjin. However, that land is becoming more expensive each year.

Demand remained stable in the non-bonded market in 3Q14, continuing to be driven by e-commerce and retail firms. Fast-moving consumer goods companies also saw an increase in demand, with Unilever leasing 24,000 sqm in Beichen. There was no significant rise in bonded demand. However, demand in the bonded sector is expected to pick up over the next few months as manufacturing firms increase activity to meet consumer demand for the holiday season. The holiday season will also require e-commerce and retailers as well as third party logistics firms to increase their demand for space.

Rents and capital values remained relatively stable in both the bonded and non-bonded market. But with demand expected to rise and the vacancy rate at relatively low levels, rents are forecast to climb by year-end. Rising rental growth will also cause an uptick in capital values. Moreover, increased investor interest in the logistics market in Tianjin will help to prop up capital values and compress yields. Jason Wang, Head of Industrial at JLL Tianjin, pointed out, "There are still abundant opportunities in Tianjin's investment market and we expect to see more companies purchasing assets over the next several quarters."


One new shopping mall and an expansion phase opened in 3Q14. Hang Lung Properties opened its first shopping center, Riverside 66, in Tianjin along Heping Road. The shopping mall has been well received by the public and is expected to become one of the most popular shopping destinations in Tianjin, especially once it opens all of its first floor stores. Florentia Village in Wuqing opened its second phase in September, expanding the popular outlet mall's footprint by approximately 7,000 sqm (GFA). Sunny Yin, Head of Retail at JLL Tianjin, noted, "The opening of Riverside 66 and the expansion of Florentia Village are representative of how international developers are fundamentally changing the retail environment. When SM City Tianjin and Kerry's Riverview Place Tianjin open next year, new brands and retail concepts are anticipated to emerge in the city that will improve shoppers' overall retail experiences."

Food and beverage (F&B) and children's retailers continued to expand rapidly in the market. Several new brands opened in Riverside 66 and other locations in Tianjin. F&B is one of the few retailer categories that cannot be cannibalized by online retail; in addition, it is one of the retail offerings that residents of Tianjin have a propensity to spend money on. As a result, retailers have been opening throughout the city, in locations as diverse as Minyuan Stadium and basements of department stores. Children's retailers are also opening many new locations, particularly brands that offer children's education and entertainment.

International fast fashion retailers, such as GAP and H&M, have also been opening more stores in Tianjin. These companies have large expansion plans for China, and as many have few or no locations in Tianjin, they have been ramping up new store openings over the past several quarters.

Even as new supply caused the overall vacancy rate to increase slightly to 15.3% in 3Q14 from 14.3% in 2Q14, on a like-for-like basis, rents continued to experience moderate growth, rising approximately 2% q-o-q. Driving rental growth were the city's top performing shopping malls.

High-end residential

In anticipation of strong demand in September and through the rest of the year, developers launched ten new projects, totalling approximately 3,000 units. The new units were primarily launched in the Haihe Riverside and Old Town submarkets, as well as in the non-traditional high-end residential areas of Tianjin. The projects that saw the best sales performance, Yanlord Riverside Garden, No. 8 The Milestone and Sunac Center, were all by large domestic and international developers that have successful track records in the city.

Although demand picked up in 3Q14 with 960 units sold, an increase of 30% q-o-q, transaction volumes are down significantly compared with the previous year, as sales volumes declined 23.6% y-o-y. Tianjin is following the same pattern as the rest of China: homebuyers are reluctant to purchase new housing because they are still anticipating prices to fall. However, in Tianjin's high-end market, prices have remained relatively stable, only increasing 1% q-o-q to RMB 22,300 per sqm. Durrell Mack, Head of Research at JLL Tianjin, remarked, "Large developers in Tianjin's residential market have been reluctant to lower prices because transaction volumes are still relatively high. But smaller developers that are not seeing high sales turnover are expected to lower their prices, which will cause home prices to fall in the next several quarters."

Over the next several months, transaction volumes are expected to be much lower than their 2012 and 2013 highs, averaging between 700 and 800 units per quarter. Keeping sales volumes at that level will be home purchasers looking to upgrade their living situations and first time homebuyers.