Skip Ribbon Commands
Skip to main content

News Release

Tianjin

Retail continued to see robust demand in a newly opened mall; logistics demand was driven by growing e-commerce firms in 1Q16

According to JLL Tianjin’s 1Q16 Property Review


​​​​​TIANJIN, April 27, 2016 – JLL’s 1Q16 property review revealed the following:

  • Net-absorption in Grade A office tripled from the previous quarter due to strong demand in Joy City
  • E-commerce and 3PL firms remained active for leasing warehouse space
  • Apple opened its second store in Riverside 66 to bring in more foot traffic
  • Capital values rose dramatically in the high-end residential market

​​​​​​​​

Office 

Demand continues to stem from domestic finance companies as well as upgrading tenants from older projects. While domestic finance companies continue to account for most of the leasing transaction volume, they are expanding at a much slower rate than in previous quarters. Net-absorption was driven by upgrading tenants, both MNC’s and domestic companies in various sectors, into Grade A and newly completed Grade B buildings. Net absorption in the Grade A market reached 21,978 sqm in 1Q16, tripling from the previous quarter. Joy City accounted for 84.5% or 18,592 sqm of quarterly Grade A net-absorption, picking up tenants from various sectors like healthcare, trade and finance. Aikang Healthcare, for example, leased two floors in Joy City, amounting to 3,492 sqm.

Only one Grade B building, Bohai Bank Building, was completed in 1Q16, adding 130,000 sqm to the Haihe Riverside submarket. 71% of the space was allocated for self-use as Tianjin’s Bohai Bank headquarters, while the remaining 29% still remains vacant, but the project is actively seeking tenants for lease. As most of the space was for self-use, the overall market vacancy rate experienced a slight decrease, declining 2.6 percentage points q-o-q, but increasing 4.8 percentage points y-o-y because of the large supply wave seen in 2015. Meanwhile, the Grade A vacancy rate also fell 3.6 percentage points q-o-q to 44.0% due to the high net-absorption seen in Joy City while no new Grade A projects entered the market this quarter.

Overall rents edged down slightly in 1Q16, falling 0.3% q-o-q and 2.3% y-o-y, to RMB 96.8 per sqm per month. Grade A rents fell 0.2% q-o-q and 1.4% y-o-y to RMB 116.3 per sqm per month. Sustained high market vacancy and the slowdown in the financial sector has caused landlords to lower rental expectations and pursue tenants in other sectors, most of which are more price-sensitive to rents. Average CV’s in the overall market fell in line with rents, decreasing 0.3% q-o-q and 2.3% y-o-y, to RMB 19,884 per sqm. 

LV Weiran, JLL Tianjin’s Head of Markets commented, “The office market has not seen a lot of new set-up or expansion demand from MNC’s or from traditional sectors like logistics in recent quarters. However, we believe that upgrading demand is still strong and many of these types of tenants will continue relocating to higher quality space, particularly into Grade A, as it becomes available at lower rents. Landlords able to correctly position themselves and play to their competitive advantages can still achieve strong net-absorption levels in the wake of a large supply wave.

​​

Logistics 

Leasing demand for non-bonded space in the first quarter increased slightly (21,211 sqm vs 15,222 sqm in 4Q15), but was substantially lower than demand from the previous year when several larger deals were signed.  Most leasing demand was focused on the Wuqing and Beichen areas which benefits from retail and e-commerce tenants. Besides, third party logistics (3PL) firms continued to be the main demand drivers in Tianjin. One notable transaction in the quarter was domestic online bookstore Wenxuan.com leasing more than 10,000 sqm of space in Goodman Wuqing Logistics Centre Phase II. 

While there was a large amount of new supply in 2015, no new logistics space was completed in 1Q16, but more is expected at year end.  Total stock remained at 3.0 million sqm with the non-bonded vacancy rate at 24.3% and the bonded vacancy rate at 9.1%. The non-bonded vacancy rate dropped slightly by 0.9 percentage points q-o-q. 

Net effective rents remained virtually unchanged at RMB 0.90 per sqm per day, an increase of only 0.2% q-o-q and 0.7% y-o-y. As a significant amount of vacant space in the non-bonded market still needs to be absorbed, developers are not pushing up the rents. 

With e-commerce sales growing at 93% annually, we believe there continues to be upside for leasing from this sector, although these tenants have already built up larger warehouses. There remains some concern about future supply if all of the space developers have purchased is developed in the coming three to four years. Michael Hart, Managing Director of JLL in Tianjin noted, “The picture for the logistics markets is very submarket specific, areas located between Beijing and Tianjin (Wuqing and Beichen) have seen the strongest demand from e-commerce and retailer players, while logistics space near manufacturers has seen less demand.”

​​

Retail

Net absorption in 1Q16 was recorded at 167,300 sqm and saw robust demand. Although it saw a decrease of 17% q-o-q, net absorption doubled the average number in 2015. New demand was mainly driven by casual dining (F&B), entertainment and consumer goods. Three hypermarkets leased space in community malls in non-core areas which are trying to introduce hypermarkets to meet shoppers’ daily consumption demand and to increase foot traffic and sales. For example, Bravo Supermarket leased 6,000 sqm in CapitaMall and Le Super leased 4,000 sqm in We Life Plaza. Another notable leasing transaction this quarter was the new Apple Store which leased more than 1,000 sqm of space in Riverside 66, the project developed by Hang Lung Properties.

Delight City completed in 1Q16 as the only new shopping mall entering Tianjin. Delight City added 200,000 sqm of space in a non-core area, taking total stock in the overall market to 3.6 million sqm by end-1Q16. New demand and supply in the quarter was balanced, so the market’s overall vacancy rate remained mostly flat at 16.9%, a slight decrease of 0.1 percentage points q-o-q and an increase of 0.8 percentage points y-o-y.

Rents rose slightly as most mature projects in core areas witnessed strong performance and tight vacancy rates. Well-performing malls such as Joy City were able to ask for higher rents. This pushed up overall average rents to RMB 11.1 per sqm per day, a rise of 1.0% q-o-q and 3.4% y-o-y.

We expect the retail market to become more competitive and continue to be a tenant favorable market in 2016, especially in core areas. One new project Metropolitan Plaza is expected to open in 2Q16; some department store conversions in core areas are also underway. Sunny Yin, Head of Retail for JLL Tianjin, commented, “Many department stores will complete their conversion processes soon, such as Robbinz, which just finished its repositioning of B1 to be a destination for casual F&B and lifestyle brands.”

​​

High-end Residential 

Housing was driven by the loosening measures released in 2015, which included lower down payment ratios as well as greater access to the public housing fund. Sales volume in the high-end residential market remained strong in 1Q16, reaching 2,706 units, decreasing 25.5% q-o-q and increasing 44.4% y-o-y. The quarterly decline was partly due to the seasonal effect of the Chinese New Year holiday as well as the limited primary stock available within Central Tianjin. Unsold inventory in the high-end market stood at 2,155 units by the end of this quarter, its lowest level since 2007.

1,277 new units were launched in 1Q16, decreasing 57.1% from the previous quarter but still increasing 100.2% y-o-y. The majority of new supply in 1Q16 came into the Meijiang submarket as the National Tourism Project, developed by Greentown and Sunac, accounted for more than half (52.0%) of the total new supply by itself.

High-end capital values saw a rapid increase in the quarter, rising 11.0% q-o-q and 14.2% y-o-y, and stood at RMB 24,194 per sqm by end-1Q16. Besides strong buyer interest, CVs were further aided by the limited supply in Central Tianjin’s primary market, giving developers negotiating power over home buyers as they were able to raise asking prices significantly. Rental values only saw a marginal increase in the quarter, rising 0.8% q-o-q and 0.9% y-o-y.

​Chelsea Cai, Head of Research for JLL Tianjin, remarked, “Demand remains robust in the present, and continues to be driven by the policy support released in 2015. However, as evidenced by recent tightening measures in Greater Beijing and several other Tier 2 cities, the Tianjin government is likely to pursue similar policies to prevent the housing market from overheating. As such, we think demand will begin to taper off in the coming months, causing capital values to grow at a slower pace in 1Q16.”

– ends –

​​

>>>Read more about JLL News
>>>Read more about​ JLL Research

​​ ​​​

​​

About JLL

JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 230 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $56.4 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit   www.jll.com

JLL has over 50 years of experience in Asia Pacific, with over 32,000 employees operating in 83 offices in 16 countries across the region. The firm was named ‘Best International Property Consultancy’ and ‘Best Property Consultancy Asia Pacific’ at the International Property Awards Final 2015 as well as number one real estate advisor in Asia at the 2015 Euromoney Real Estate Awards. www.jll.com/asiapacific  

In Greater China, the firm was named ‘Best Property Consultancy in China’ at the International Property Awards Asia Pacific 2015, and has more than 2,200 professionals and 14,000 on-site staff providing quality real estate advice and services in over 80 cities across the country.  www.joneslanglasalle.com.cn​​​