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News Release

Tianjin

Warehouse market in Tianjin witnessed large take-up from E-commerce and 3PLs; new stores entered high-quality shopping malls

According to JLL Tianjin’s 2Q15 Property Review


TIANJIN, July 20, 2015 – JLL’s 2Q15 property review revealed the following:

Leasing demand is mainly from domestic finance firms seeking high quality office space 
New logistics projects entered with high commitment rate
Demand from F&B, kid’s and entertainment is still booming in retail market
Loosening policy brought buyers back, boosting sales volumes rose 163.7% q-o-q

Office 

Demand in the office market was more active in 2Q15 compared with the first quarter’s quiet market. Demand from domestic finance firms continued to dominate both Grade A and Grade B office market, as they sought for high quality space. A notable leasing transaction was Jingu Futures leased 2,200 sqm in the Metropolitan Tower Tianjin. 

Developed by CapitaLand, Tianjin International Trade Centre in the Xiaobailou submarket completed in 2Q15 and added 40,000 sqm of Grade B office space to the market. Meanwhile, Tianhui Plaza A, another completed building with an extra 18,000 sqm of lettable space and originally purchased by PICC from Beijing Financial Street and Poly for partially self-use, entered the leasing market this quarter. No new completions in the Grade A office market. 

Although new projects were completed, the overall vacancy rate increased only slightly, thanks in part to strong leasing from domestic finance firms. It was up slightly by 1.5 percentage points q-o-q to 28.7%.  In the Grade A market, Metropolitan Tower Tianjin saw strong leasing demand and as a result, the Grade A office vacancy fell to 33.3%.

Rents declined 0.4% q-o-q to RMB 4.1 per sqm per day under pressure from the future supply pipeline. Grade A rents remained unchanged, as expansion requirements by domestic financial firms actively absorbed the vacant space.

In the second half year of 2015, we expect seven office buildings to complete with a total GFA of 328,000 sqm. “Tianjin office market will become more varied in the next few quarters in terms of vacancy rate and rents. Wholly-owned and well-managed projects will outperform the market average. For example, COFCO’s Joy City began to absorb upgrading demand from the nearby lower grade office buildings and achieved a high pre-leasing rate in 2Q15,” said Lv Weiran, Head of the Markets Team in the JLL Tianjin Office.

Logistics 

Demand remained stable with more than 130,000 sqm of net absorption. The main drivers of demand came from third-party logistics (3PL) companies and e-commerce. For example, Deppon Logistics, a 3PL company, moved into a 30,000-sqm built-to-suit warehouse, Prologis Tianjin Ninghe Logistics Center Phase I. E-commerce continued to be active in 2Q15. After Amazon and JD.com entered Tianjin, another e-commerce company – Jumei.com – leased about 20,000 sqm of space in Wuqing to cover the combined Tianjin, Beijing, Hebei area. Michael Hart, Managing Director at JLL Tianjin, pointed out, “More e-commerce companies tend to enter the Tianjin Wuqing submarket as their distribution center in north China because of the high quality warehouses and the strategic location within reach of Beijing and Hebei Province.”

Three new non-bonded warehouses completed in 2Q15, adding approximately 140,000 sqm of space in Tianjin. Driven by the growing demand from 3PL and e-commerce companies, new projects came on stream in Tianjin with a high pre-leasing rate. The landlords of existing warehouses also leased out vacant space gradually. As a result, the vacancy rate of the non-bonded market saw a slight decline of 1.1 percentage points to 21.1% in 2Q15. Key projects included G Park Tianjin Phrase 2, Goodman Beichen Landport Logistics Estate Phase 2 and Prologis Tianjin Ninghe Logistics Center Phase I.

Non-bonded market rents stayed flat. Two new projects were launched in the mature area of Xiqing District, and another build-to-suit warehouse had an occupancy rate of 100%. As a result, the rents of these three projects did not bring the overall rent down. Demand increased in line with the new supply, resulting in rents remaining unchanged in 2Q15.

Another six projects are expected to complete and enter the market later this year. The large new supply will drive the vacancy rate slightly higher by end-2015; however, we forecast the demand will continue increasing steadily due to the emerging 3PL and e-commerce companies. Given the strong demand, limited land supply and some investors becoming more optimistic about the logistics market because of the policy benefits from the Tianjin Free Trade Zone, capital values are expected to keep increasing.

Retail  

Large number of brands made debuts in Tianjin. In 2Q15, demand continued to come mainly from the food and beverage (F&B), kids’ and entertainment sectors. Sunny Yin, Head of Retail at JLL Tianjin, commented, “The trend of growing demand from the F&B and entertainment sectors is expected to continue. The main reason is the changing customer behaviour, which shows a growing preference for experiential shopping under the influence of online shopping.”

Along with the newly completed high-quality shopping malls, more brands came into Tianjin for the first time. For example, Matta Pizza opened in Riverview Place Tianjin. Even amid the slow expansion of fast fashion brands, a Korean brand, SPAO, opened its first two-storey store in Tianjin. British Luxury leather goods retailer Tusting also opened in Riverview Place Tianjin, its first location in China.

Three new shopping malls opened, improving the Tianjin shopping environment. Tianjin International Trade Center opened in the Xiaobailou submarket, featuring more than 40% of space for F&B. Therefore, the project enjoyed high foot traffic, led by white-collar professionals working nearby and young people from all over Tianjin. Riverview Place Tianjin, a mid-range shopping mall, opened as the first mall in the Riverside submarket with a large resident population. Yanlord Riverside Plaza added another 10,000 sqm of retail space. Three projects, totalling 132,500 sqm, launched with a large amount of available space. As a result, the vacancy rate of the overall market increased slightly to 16.9%.

Rents declined as new supply comes on stream. Well performing shopping malls, such as Joy City developed by COFCO, and a growing number of projects outside of the traditional submarkets continued to see rents climbing. However, under pressure from popular projects, landlords of weak projects started to lower rents to attract tenants.

Another five malls are expected to enter the market in the second half of 2015. A large amount of new supply located in the non-core area will see lower than average rents, which will drag down the rents of the overall market moderately by end-2015. LaVita department store located in Exchange Mall closed during Q2. The space is currently being redeveloped and is expected to reopen in 2016. 

High-end Residential 

Further supportive policies launched in March boost sales in 2Q15. Moreover, municipal rolled out a couple of housing fund easing policies in May, further helped sales in the overall primary market. Followed by the national housing recovery, loosening policies brought home buyer in Tianjin back to the market. Total sales volumes of high-end residential dramatically rose 163.7% q-o-q to 2,207 units in 2Q15. 

Developers gained more confidence on launching new supply this quarter. A total of 1,292 new units were launched into the high-end residential market in 2Q15. Several well-performing projects were quickly absorbed by upgraders, thanks to locations near good schools and future metro lines. For example, Wellington Riverside Garden, developed by Lujiazui Properties, sold a total 497 units, accounting for 22.5% of total units.

Capital values in the high-end residential market increased 0.4% q-o-q to RMB 23,500. 

“We expect further accommodative policies to roll out on housing market to boost sales and capital values as well. At the same time, several well-performed projects located in the premium areas are able to increase prices in the second half year.” Chelsea Cai, Head of Research at JLL Tianjin office remarked.