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JLL’s latest research reveals 60 Chinese cities that will thrive on smart growth
SHANGHAI, 9 April 2015 – Today, JLL(NYSE:JLL) published China60, a comprehensive research report that assesses the nature of real estate opportunities across sixty of China's most important secondary and tertiary cities. The report maps out China's emerging business locations and identifies the drivers that are shaping China's city hierarchy.
KK Fung, managing director for JLL Greater China commented: "China60 comes at a time when China is transitioning from fast growth to smart growth. This 'New Normal', marked by lower but more sustainable economic growth, means that decision makers in the commercial property industry need to reassess their strategic choices in the light of higher-value growth, which will boost demand for modern commercial real estate across the China60 cities."
Jeremy Kelly, JLL's Director in Global Research, said: "The cities comprising China60 would be the world's second-largest economy in terms of purchasing power, and despite the economic slowdown, are projected to contribute 15 percent of global growth over the next decade. While much of the growth is coming from secondary and tertiary cities in Southwest, Northwest and Central China, the rise of mega city-regions is adding a new complexity to China's urbanisation. Satellite cities in the Yangtze River Delta region, in particular, have shown remarkable growth, thanks to dynamic private enterprises, advanced supply chains, and strong intra-regional connectivity."
"The macro fundamentals to deliver ongoing strong demand for all major commercial real estate sectors over the next few years are evident, and China60 has tremendous capacity to absorb any excess commercial real estate space over the medium term. The demand for office, retail, warehousing, and hotel space will rise in tandem with the shift of economic development towards expanding the service sector." said Kelly. "However, following years of rapid economic expansion, China60 cities are currently facing a short-term oversupply. As these markets mature, investors will require stronger discipline and much more robust planning and decision-making."
The continued growth of the consumer class, now 130 million people in the China60, means that the Chinese economy is driven more than ever by domestic consumption. Logistics warehousing will continue to provide exceptional long-term growth opportunities in the China60, underpinned by demand from traditional retail distribution, as well as due to rapid growth in e-commerce and multi-channel retailing.
With a huge influx of new shopping malls, the rapid adoption of e-commerce is also quickly driving the retail sector into uncharted territory. But the sector will blaze its own trail as bricks-and-mortar facilities grow in tandem with omni-channel and experiential retailing.
As the expansion of large private Chinese companies, such as Alibaba, Huawei, and Tencent, reaches a positive tipping point, they are now a distinctly more visible driver of Grade A office demand within the China60. Tier 1.5 markets in particular will benefit from the shift towards high-value activities, and have a favourable outlook for absorption.
In contrast, the hospitality sector has been impacted most severely by the "New Normal" and will go through a period of wholesale structural change as it repositions for future growth. JLL expects the sector to become leaner and fitter, and it will likely provide some favourable buying opportunities for investors over the next two to three years. Mid-scale and select-service chains are growing quickly.
KK Fung concluded: "As China60 cities enter a new era of competitiveness, domestically and globally, 'city brand-building' will be a defining theme over the next few years. Quality of life, cultural assets, and environmental considerations are coming to the fore as these cities compete for talent and businesses. The real estate industry will play an important role in making the China60 cities liveable, resilient, and sustainable."
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Notes to editors
As a follow up to our 2007 China30 report, 2009 China40 report, and our China50 report from 2012, the China60 report provides a comparative framework for property investors, developers, corporate occupiers, and local governments to view this expanding pool of thriving cities from a commercial real estate perspective.
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