The Greater Bay Area: Rise of a World-class Mega-City Region
JLL publishes the latest whitepaper “The Greater Bay Area: the path ahead”
Shenzhen, 30 June 2020 – Strengthened connectivity between South China’s major hubs is giving rise to a true mega-city region according to research from global real estate consultant JLL (NYSE: JLL). The recently published whitepaper. The Greater Bay Area: the path ahead explores how infrastructure upgrades and stronger economic ties between cities in the Guangdong-Hong Kong-Macau Greater Bay Area (GBA) is solidifying growth in the three urban clusters of Shenzhen, Guangzhou, and Hong Kong.
China’s blueprint for economic development in the coming decades is based on a model known as City Clustering Development. The primary objective of this model is for the member cities of a cluster to be able to leverage on each other’s comparative advantages across areas such as natural resources, talents, infrastructure, and governance. “We see the Greater Bay Area now starting to take on characteristics once limited to a single city, as the region’s integration results in ever-stronger agglomeration”, explains Jex Ng, Managing Director, South China. “The GBA is one of the three key clusters in China which is set to rise to the global stage”.
Different cities, diverse strengths
The GBA strategy is aimed at boosting economic primacy, with contribution to national GDP expected to rise beyond the current 12%. Shenzhen is now the primary growth node in the GBA, due to its concentration of highly innovative and technically advanced industries serving to stimulate wider economic development. “Shenzhen can build on its role as an innovation hub established over the last decade” say Silvia Zeng, Head of Research, South China. “For example, AI, 5G, robotics and genetics have led to a vast pool of intellectual property that can be harnessed towards new applications and business ventures.”
Meanwhile, Hong Kong’s key role within the region is to provides a gateway to global capital markets for mainland firms. Two-way trade in financial services across the border is expected to rise, with the central bank and multiple financial regulatory authorities jointly announcing a set of policies in May 2020 which support further opening and innovation in financial services between the GBA’s mainland cities and Hong Kong/Macau.
The region’s third major player Guangzhou is expected to experience a manufacturing sector upgrade, shifting production towards more hi-tech and advanced products. “Although Guangzhou appears to be less of a powerhouse when compared to Shenzhen, its tech subsectors are well differentiated and are generally more labor-intensive” points out Zeng.
Emerging growth patterns - Multi-city synergy in the GBA
Strong government investment in a number of massive infrastructure projects form a key part of the GBA development strategy. As these reach completion, increased travel efficiency and better intra- and inter-city connectivity will help bring in both new businesses and a larger workforce, creating a multi-city synergy in the region.
Improved connectivity and the deepening of economic ties between cities is shaping the patterns of the GBA’s future growth. It is expected that within the next five years, beyond the three core cities, growth drivers will come from three important city clusters. The future of the region’s technology sector and manufacturing sector is clearly underpinned by the city-quadrangle formed of Shenzhen-Dongguan-Guangzhou-Foshan, which is the most powerful among all city clusters in the GBA. As the region’s signature global innovation hub, it will also strive to become the global center of hi-tech and advanced manufacturing.
Future Network: Connectivity & Economic Ties
On the Pearl River, the new Hong Kong-Macau-Zhuhai Bridge and the proposed Shenzhen-Zhuhai Bridge will both play important roles in enabling fast movement between cities on both sides of the waterway. Their completion will effectively grant Zhuhai and Macau access to two of the most important tourist sources, Shenzhen and Hong Kong, and open a new corridor for tourism and retail. In addition, a new round of urban expansion and industrial transfer will occur between Shenzhen and Zhongshan, where the outflow of lower-end manufacturing will free up precious land for the Shenzhen to accommodate more high-value activities such as R&D and smart manufacturing.
Investment opportunities in the GBA - Seeding new districts with TODs
Transit-oriented developments (TODs) are mixed-use projects with office, retail, and apartment components which are tightly integrated with inter-city and local rail networks. TOD projects will likely be promoted by local governments in upcoming areas of the GBA to attract experienced investors, and it will become a preferred mode of entry for foreign or Hong Kong developers and investors, as they have abundant experience and can bring strong branding. Emerging areas in Tier I cities along with upcoming transportation hubs in key Tier II cities, both offer potential investment opportunities in TODs, thanks to expanding metro networks and multiple railway stations.
GBA initiatives have helped to drive rapid growth in the TMT and finance sectors, leading to a significant surge in absorption in both the Guangzhou and Shenzhen Grade A office markets in the last five years. In Guangzhou, absorption totals are expected to rise by 40% or more in the next five years while the rate in Shenzhen may rise as high as 50% over the same period. While the unfolding coronavirus situation means that office demand in GBA may face strong pressure in the short term, medium-to-long-term growth predictions remain favorable.
As for the logistics market, demand for logistics facilities continues to rise in tandem with retail distribution, both online and offline, as well as the rapid growth of technology-centric manufacturing. The improvement of road networks within and beyond GBA will help boost rents in mature markets while giving rise to new investment opportunities in the emerging markets beyond the boundary of the GBA.
With steady growth of the region set to continue into the horizon, nearly all property types are going to benefit. As Ng advises, “The economic ties and the city clusters bound by these ties form the region’s development cornerstones. We believe that in the short-term, if any property sector enters a downturn due to external shocks or short-term headwinds, investors should seize the opportunity to increase their positions in the GBA so as not to miss the promising return of the region’s long-term development.”
Projected development timeline and development intensity for city clusters
For more details, please download ‘The Greater Bay Area: the path ahead’ report here.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion, operations in over 80 countries and a global workforce of more than 94,000 as of March 31, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.