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JLL Beijing: “We must be smarter” about building in an increasingly urbanized China with an increasingly sophisticated workforce
BEIJING, September 6, 2016 – JLL (NYSE:JLL) hosted a seminar in Beijing entitled “Building to the Future,” which discussed key drivers for the Beijing office market and how they will lead to significant changes over the years to come. Julien Zhang, Managing Director for JLL North China, said that urbanization trends show no sign of slowing down, with 70% of the world’s population estimated to be living in cities by 2050, and 70% of China’s population to be urbanized by 2030. With this in mind, Zhang said, cities like Beijing are going to have to significantly change their approach in order to meet increased density and demand: “It has to be about not just constructing things, but constructing the right things at the right time,” he said. “The approach of ‘If you build it, they will come’ won’t be safe anymore, and carefully planned buildings will be necessary for the industry to advance.” Additionally, a changing workforce with more sophisticated workplace expectations will bring competitive advantages to those who can provide comfortable office spaces with smart features such as clean air, gyms, and intelligent, convenient facilities.
Pulling Forces: OBOR, Decentralization, and CBD Core Expansion
According to the firm’s findings, there are three key pulling forces determining the future of Beijing’s office market: The “One Belt, One Road” initiative (aka OBOR); government plans to encourage decentralisation; and the expansion of the central business district. “Beijing is at the heart of OBOR,” said Steven McCord, Head of Research for JLL North China, referring to the ambitious China-led plan to connect the economies of the original Silk Road. “In this way, OBOR is destined to cement Beijing’s role as a global nerve center for the expansion of the new Chinese multinationals.” Supported by the government’s long-planned strategic tool for China’s globalization, Beijing will see the expansion of a much broader set of private and quasi-private firms with overseas contracts and operations in infrastructure and development.
The expansion of Beijing will give rise to multiple sub-centres, where new business districts will emerge and become of greater importance. As an eastward expansion of the city, the area of Tongzhou is a key focus area for development and receives strong government backing. Also, the northeast area of Wangjing is emerging as the city’s next major IT hub. Furthermore, the city’s current central business district is expanding into a new superblock and will be home to an additional 2.1 million sqm of office space over the next decade and will include the city’s new tallest tower – Zhongguozun, which at 530 metres, will scale nearly 200 metres above the current tallest China World Tower.
Sources of Demand: Mass Entrepreneurship, IT, and Finance Industry Trends
Demand drivers for office space in Beijing can be found across multiple key industries, including startups, IT, and Finance, JLL said. Renewed efforts by the central government to encourage formation of new, high-tech companies is driving “mass entrepreneurship” in Beijing, and the city is set to overtake Silicon Valley in the near future as the innovation capital of the world for software. This trend is already well underway: Tech start-up venture capital investments in China last year were worth USD$27 billion according to industry sources, and state media has reported that seven businesses are registered in the country every minute. Additionally, as risky areas of the finance world such as shadow banking and peer-to-peer (P2P) lending come under improved regulation and regulatory enforcement, McCord predicts that these parts of the finance industry will emerge as reliable office occupiers.
Many firms are following in the footsteps of the BAT giants (Baidu, Alibaba, Tencent) and western firms like Uber and Airbnb. McCord said: “The growth of high-technology firms will spill over into the mainstream Grade A office market as these firms mature and upgrade from small spaces into large, comfortable, high-grade offices.”
Influential trends: Building for tomorrow’s workers
Beyond the influence of market/demographic trends, the new generation of Chinese workers with higher workplace demands will play a key role in the office market: “The way we work and the way we want to work is changing,” said Matt Clifford, Head of Energy and Sustainability Services for JLL North Asia. “For Millennials in China, it’s no longer the just the job that matters, but also the working environment.” In the years to come, the offices that offer collaborative workspace and cater to workers’ health and well-being will be the most successful. This includes clean and filtered air, a tech-enabled workspace, optimal temperatures and other features of smartly built and functional buildings.
In addition to smart buildings that place an emphasis on comfortable work environments, Sylvia Koh, Head of Consulting for JLL Asia Pacific discussed how Beijing can benefit from co-working spaces, especially given the rate at which new businesses are registering in the city: “For companies looking to improve their competitive position, co-working can provide a range of benefits from efficient space utilization to encouraging collaboration and innovation,” she said. “The strategy’s best application will be dependent upon alignment with the organization’s strategic priorities.”
As China’s economy ventures further into its “new normal” phase, developers and corporates that place a greater emphasis on responding to market demands – as opposed to simply building iconic landmarks – will find greater success in years to come. “The future will also be about bridging the gap – building for tomorrow, not for yesterday,” said Zhang. “Quality matters and workers demand comfortable, advanced workplaces more than ever.” With dedicated expertise in all stages of office leasing, fit-out, consultancy, and facilities management, JLL offers up realistic solutions to the increasingly complex challenges brought about by China’s ever-evolving urban landscapes.
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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 280 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 $59.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, www.jll.com.
JLL has over 50 years of experience in Asia Pacific, with over 34,000 employees operating in 92 offices in 16 countries across the region. The firm won 15 awards at the International Property Awards Asia Pacific in 2016 and was named 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 2016, 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
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