Industrial growth burgeoning in Nanjing
As one of Nanjing’s leading developing industries, how will advanced manufacturing impact the city’s real estate market?
In China’s 14th Five-Year Plan (2021-25), the city of Nanjing clearly put forward the goal of developing a modern and innovative city, which is critical to strengthening and expanding its key industries. In 2017, Nanjing established 15 hi-tech zones in all administrative regions, 12 of which was located in the central city, including Jiangbei New Area (state-level), and optimised the "4+4+1" industrial system. Leading companies (e.g., Huawei, ZTE, and TSMC) have settled in Nanjing, driving mid-stream and downstream companies to form an industrial agglomeration, creating a new ecosystem of industrial integration with equal status, resource sharing and cooperation.
The industrial growth drivers of this crucial city have improved. In 2021, 128 provincial and national small giant enterprises were cultivated in these hi-tech zones in the central city. Biopharmaceuticals, energy conservation and new materials made up the highest proportion at approximately 34%. Jiangbei New Area accounted for 20 businesses, with specific examples including Simcere Pharmaceuticals, rated as a provincial-level small giant.
Figure 1: Distribution of small giant enterprises in hi-tech zones (2021)
Source: Nanjing government
Note: Small Giant enterprises: "Specialized and new" small and medium-sized leading enterprises that focuses on market segments,
high innovation, high market share, key core technologies, and excellent quality and efficiency.
Jiangbei New Area took a position among the top three in Nanjing's total planned investment projects from 2019 to 2022. Among eight key industries, biopharmaceuticals, energy conservation and new materials industries have the most significant investment and a number of contracted projects. BASF and YPC cooperation project is scheduled to be launched in 2022, with a total planned investment of 27.2 billion yuan. According to the government report, the life and health industry will gather over 2,000 related enterprises, whose industry scale will exceed 500 billion yuan, attracting more than 50,000 employees by 2025.
Figure 2: Total planned investment and projects by area & industry (2019-2022)
Source: Nanjing government
Note 1: “4+4+1” industrial system: aimed at accelerating and optimizing leading industries through creating 4 advanced manufacturing industries,
developing 4 service industries and cultivating a batch of future industries.
Note 2: 8 key industries and industry carriers: Service Industry Carriers & Others; Manufacturing Carriers & Others;
Modern logistics & high-end business and commerce; Cultural Tourism Health; Software & Information Services;
Financial & Technology Services; Emerging Electronic Information; Bio- pharmaceutical & Energy Conservation & New Materials;
Green Intelligent Vehicle; High-end Intelligent Equipment.
In 2021, Nanjing focused further on industrial development by promoting the high-quality use of industrial land. This intensified competition between the public and private sectors and applied more pressure on the commercial real estate market. With the gradual development of industry in Jiangbei New Area, demand is also steadily growing. One of the growth factors is the favourable policy and the availability of large land areas that meet enterprises’ relocation and new set-up needs, compared to congested traffic and high rent in core areas. In addition, the accessibility of subway lines and corporates’ conservative leasing strategies have motivated companies to turn to this area as their preferred choice for leasing and buying.
JLL recorded that the leasing and sale cases of buildings completed in the past three years were very impressive. Due to low pricing and favourable policies, these buildings were at least 90% occupied. This attracted many investors to set their sights on Jiangbei New Area, attempting to become the first to benefit from the projects.
Figure 3: 2019-2022 sample occupancy rate & GFA
Source: JLL Research
Continuous positive effects on industrial development will give birth to more industrial reforms. Under the new ecology of preferential policies, we predict that the demand for the coordinated development of multiple industries in Jiangbei New Area will rise further, boosting the future growth of the commercial real estate market. As Jiangbei New Area has developed well, it has positioned itself excellently to take advantage of the new industrial developments.