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News Release


JLL: Tianjin’s real estate market ends on a strong note

TIANJIN, January 15, 2016

Office – Leasing demand was mainly driven by domestic financial firms in 2014
Logistics – Leasing demand primarily came from retailers and 3PLs
Retail –  Zara adds flagship location in Tianjin 
High-end residential – Government easing of lending policies spurred home sales growth in 2H14, bringing back homebuyers


Total stock for both Grade A and Grade B office towers by end-2014 reached 1.7 million sqm. Metropolitan Tower Tianjin was completed in 3Q14 and delivered 103,000 sqm into the Grade A office market, resulting in total stock of the Grade A market reaching 405,000 sqm. During 2014, ten Grade B office buildings were completed, with four of the ten buildings for self-use and accounting for 30% of the new supply. Thus, total Grade B stock rose, but only 255,000 sqm entered the market for leasing and strata-titled sale.

Demand in the Tianjin office market remained robust for the whole year, mainly driven by domestic financial, trading and logistics firms. Total net absorption increased 17% y-o-y. In the Grade A office market, Tianjin World Financial Center had the highest demand in 2014, followed by Metropolitan Tower Tianjin. Robust demand pushed down the vacancy rate in the Grade A office market, largely driven by domestic financial firms as they continued to look for high-quality office buildings. For example, a total GFA of 5,300 sqm in Metropolitan Tower Tianjin was leased to domestic financial firms in 4Q14. For the whole year, average gross rents (based on GFA) decreased 1.8% y-o-y to RMB 4.1 per sqm.

In 2015, as China's economy begins to slow and shift to a prolonged period of decelerating growth, demand in the Tianjin office market is predicted to remain stable, especially from domestic financial companies, which will continue to look to establish new opportunities in the city. Eight office buildings are expected to enter the market in 2015, delivering a total GFA of 440,000 sqm. Lv Weiran, Head of Markets in JLL Tianjin, said, "Next year will be another year with high-quality office supply, increasing the competition among existing buildings and giving tenants more choices."


One non-bonded warehouse, Goodman Xiqing Logistics Centre Phase I, was completed in 4Q14. The project is around 49,000 sqm and is located in the Xiqing Economic Development Zone. For the whole of 2014, three high quality warehouses entered the market totalling approximately 167,000 sqm. As a result, the total supply in the overall market reached 2.2 million sqm. All three projects were non-bonded, developed by the international developers, Goodman and GLP. No new bonded supply completed in Tianjin in 2014, so the stock of the bonded market remained unchanged at 740,000 sqm.

Demand slowed as new supply entered the market, causing the vacancy rate to increase slightly in 4Q14. During the quarter, the largest transactions occurred at the newly completed Goodman Xiqing Logistics Centre Phase I. The landlord leased 18,994 sqm of warehouse space to two international 3PLs, DSV and Sankyu. Although demand decelerated during the quarter, the composition of demand remained the same in the final quarter of 2014 as it has throughout the year, with retailers, e-commerce firms and 3PLs acting as the main drivers of demand. Due to rising domestic consumption and more online shopping in Beijing and Tianjin as well as Hebei province, these sector firms have increased their requirements for quality warehouse space. In addition, limited warehouse space in Beijing has pushed more companies to look for space in Tianjin.

In 2015, fourteen projects are forecast to open. After completion, they will increase the total warehouse stock by 890,000 sqm. The large supply is expected to drive the vacancy rate in the overall market higher, causing rental growth to decelerate. However, strong demand will keep the logistics market active and healthily. Jason Wang, Head of Industrial at JLL Tianjin, pointed out, "Large supply shows the interest that both foreign and local developers have in the Tianjin warehouse market. In the next two years, new demand from retail and the upgrader demand coming from the old warehouse projects are expected to absorb the vacant space of the new supply gradually. Moreover, competition can also lead developers to start new market segments to meet diverse demand from different tenants." 


No new projects completed in 4Q14. By the end of 2014, four new projects came into the market, including two shopping malls Riverside 66 and Aeon Shopping Center (Meijiang), the expanded Florentia Village Phase II and the refurbished Hanter Department Store. Together, the four projects added around 260,000 sqm of retail space. Repositioning of traditional department stores in the core retail areas continued. During 2014, some projects have finished repositioning with better brands mixes by introducing more F&B to attract more young shoppers.

Demand in the retail market keeps increasing. Main drivers of demand are F&B, casual fashion and kid's. Many F&B and fashion brands have debuted in the new Riverside 66 located in Heping Road. A growing number of children's education and entertainment brands entered shopping malls. Fast fashion brands became inactive, slowing their expansion strategies as the economy in Tianjin loses momentum. However, even as fast fashion brands slow their overall expansions, they are still keeping their eyes open for opportunities in core locations. For example, ZARA opened its first flagship store with four floors, located on Heping Road next to Riverside 66. H&M and GAP also opened stores in Riverside 66. With demand overall strong in 2014 rents rose 3.3% y-o-y.

In 2014, projects in non-traditional areas performed well with higher foot traffic and new brands mixes entering. As most shopping malls in emerging areas were welcomed by residents living nearby, the overall vacancy rate of these projects dropped dramatically. Despite a large increase in new supply, the overall vacancy rate in 2014 dropped by one percentage point q-o-q and only rose slightly by 1.9 percentage points y-o-y to 14.3%.

In 2015, six projects are expected to come to the market, adding 423,022 sqm of GFA to the total stock. Sunny Yin, Head of Retail at JLL Tianjin, commented, "Riverview Place Tianjin and Tianjin International Trade Center will complete in 2015, which will give existing projects a real challenge. Because as more and more projects developed by foreign groups are expected to come in the market, the importance of operation ability will be highlighted and new competition edge will be not only in brand mixes but more in operation, which will push local or traditional retail operators to upgrade their facility in both hardware and software."

High-end residential

For the whole of 2014, newly launched projects increased 10.0% y-o-y to 5,600 units in the high-end residential market, taking total available units to 9,200. However, 80.0% of newly launched projects came on stream in the second half of the year and were quickly absorbed by home upgraders. The reason for the uptake in demand in the second half of the year was the government sending a clear signal into the housing market that it would prop up home prices and housing demand. In addition, the Tianjin Government followed other cities' steps to remove housing purchase restrictions and increase the availability of home loans, at the same time reintroducing discounted home loans for eligible buyers. Many of the Tianjin Government's actions were aimed at making the purchase of a home easier for upgraders to buy second or third homes.

In late November, the People's Bank of China cut interest rates to 5.6%, which spurred home sales in Tianjin. During the year, a total of 4,625 units were transacted in the high-end residential market, down 3.5% y-o-y. However, in 4Q14, the Tianjin high-end residential sales volume was 2,207 units, an increase of 130% q-o-q. Several newly launched projects performed well due to the strong reputations of the developers, desirable surroundings and proximity to education resources. For example, Sunac Center transacted 550 units in 4Q14 at an average price of RMB 26,500 sqm, accounting for 25.0% of total transactions. The project was developed by Sunac China Holdings Ltd and is close to education resources as well as near the upcoming metro line 6. The average transaction price increased 1.9% y-o-y in 2014 and the rise in demand during the quarter pushed up the high-end residential price to RMB 22,440 per sqm, a 0.6% increase q-o-q.

The housing market is anticipated to recover to 2013 levels in 2015, since demand from upgraders has been robust in the past few months. Newly launched projects located in the Haihe Riverside and non-traditional submarkets are expected to be preferred options for homebuyers because of accessibility to metro lines and scenic views of the Haihe River. Looking ahead to 2015, Durrell Mack, Head of Research at JLL Tianjin, stated, "The quality of the high-end residential stock in Tianjin is improving and people have increasingly more options in terms of locations and amenities to live. The emergence of new subway lines and other infrastructure improvements are only going to increase the value of properties in the city, especially in the Haihe Riverside and other non-traditional high-end residential sub-markets."