Investors focus on new markets

   Date:2007/05/08

WHILE real estate opportunities still exist in firsttier cities, rising prices, increased competition and the often greater complexity of doing business in such high-profile locations are encouraging businesses and real estate investors to consider cheaper and potentially more rewarding markets.

The economic ripple initiated by cities such as Shanghai, Beijing, Guangzhou and Shenzhen is now reaching other cities, said Jones Lang LaSalle in its latest report highlighting 26 second- and third-tier cities.

The improving profiles and potential of second- and third-tier cities are attracting international developers and investors. A sizable part of international capital has targeted such cities as the proportion of total transactions increased from 38 percent in 2004 to more than 57 percent last year, the Jones Lang LaSalle report said.

Moreover, western and central China is growing faster at more than 38 percent last year, compared to 23 percent in the coastal regions.

CapitaLand has expanded rapidly into cities such as Ningbo, Hangzhou, Chongqing and Chengdu. The Singapore-based property giant now manages 28 malls across China through a joint venture with Shenzhen International Trust & Investment Company.

Merrill Lynch has invested US$30 million in a residential project in Nanjing.

Even domestic firms have shown growing confidence in second- and third-tier cities. Hang Lung Properties, for example, announced that it plans to develop 12 more malls in secondary cities by the end of this year.

Hang Lung plans to invest more than US$500 million in a new 500,000-square-meter commercial complex in Changsha, Hunan Province.

Hutchison Whampoa, Hong Kong's largest listed real estate firm, has also moved aggressively into such cities. The company has invested US$5 billion in the past two years and its land reserves are spread across Chengdu, Chongqing, Xi'an, Wuhan, Tianjin and Changsha.

The following cities will likely be regarded as emerging winners for the next three years: Chengdu, Hangzhou, Tianjin, Chongqing, Suzhou, Wuhan, Nanjing, Dalian, Shenyang, Qingdao, Xi'an, Xiamen and Dongguan.

Although most of these cities are still dominated by manufacturing industry, services will begin to move in and create more demand for office space.

Suzhou, Dalian and Tianjin will be amongst those generating the strongest demand for offices, according to the report. International corporate interest in these cities is highlighted by major leasing deals with Standard Chartered and HSBC in Suzhou, and Maersk Sealand and PwC in Tianjin. Dalian, along with Chengdu, Hangzhou and Xi'an, is becoming an increasingly favored location for Business Processing Outsourcing, or BPO, attracting the likes of IBM and Accenture.

Increasing personal wealth is likely to favor the luxury retail markets in Hangzhou, Qingdao, Dongguan, Shenyang and Xiamen. Relatively high disposable incomes and a strong disposition to spend is an attractive proposition for such retailers, the Jones Lang LaSalle report said.

Hangzhou, for example, has long been of interest to various luxury brands. Although Xiamen hasn't seen significant high-end retailing so far, the city has potential due to the wealth of its residents. Shenyang, the largest city in northern China, has attracted retailers such as Gucci, its only store in northern China.

The cities of Nanjing, Wuhan and Xi'an have strong cultural heritages and will continue to develop their Meetings, Incentives, Conventions and Exhibitions, or MICE, sector. These cities also hold future promise for hotels and strong potential for business parks and the research and development sector.

Cities such as Ningbo, Wuxi, Fuzhou, Jinan, Harbin, Changchun, Zhengzhou and Changsha will offer opportunities for low-end retailers, according to the Jones Lang LaSalle report. And as wealth increases, the desire to upgrade housing will lead to major opportunities in the residential market.

Meanwhile, those cities are starting to attract foreign interest, led by Ningbo. For instance, CapitaLand is involved in a residential project in Ningbo and Shangri-La will open a hotel in the city this year.

Kunming, Nanning, Hefei, Nanchang and Changzhou are now awakening to the possibilities ahead. However, it might take five years or more for them to reach a point at which they become a natural option for investment consideration.

The gateway cities of Kunming and Nanning may well offer opportunities in the hotel and tourism sector while Hefei, Nanchang and Changzhou would likely benefit from hotel and associated leisure property demand if they succeed on improving their images.

Source:佚名

2005- www.researchinchina.com All Rights Reserved 京ICP备05069564号-1 京公网安备1101054484号