Asia’s Changing Circumstances Increase the Competitiveness of China’s Cities
19 Apr, 2011, China
According to the latest research by Cushman & Wakefield, leading global property consultants, Hong Kong now holds top spot as the most expensive office market in the world, as strong leasing combined with limited new supply fuelled rising occupancies and skyrocketing rents. The continuation of an economic upswing and a limited supply outlook will bring about competition for office space, and result in new highs for rents and continually make Hong Kong’s CBD among the world’s priciest office spaces. If this pace continues, it will be virtually impossible for any occupier to lease space cheaply at least through 2012.
Some cost-conscious multinational companies are exploring options in outlying submarkets while the regional competitor cities are also growing stronger and have emerged as viable alternatives to Hong Kong’s CBD – i.e. some Chinese financial centers such as Shanghai, Beijing and Shenzhen that have become prominent destinations of Fortune 500 companies and other global institutions.
Shanghai, Beijing and Shenzhen’s central business districts have developed tremendously in the last few years and evolved into global financial centers. Though rent increases have been aggressive particularly in Beijing, pricing in these Chinese financial centers still remain relatively low vis-à-vis Hong Kong’s CBD making these cities increasingly attractive for global MNCs. Rental rates will remain at least three times cheaper in Shanghai and Beijing, and ten times lower in Shenzhen compared to Hong Kong. Moreover, there are significant opportunities especially in Shanghai and Shenzhen where supply pipelines are well stocked.
At the same time, due to the devastating earthquake which hit Japan in March, some multinational companies are beginning to reassess their development strategy in Tokyo and even in Japan. We are starting to see that some companies have temporarily relocated their employees to Osaka, western Japan, Hong Kong, Seoul and other adjacent locations at least until the crisis attenuates, while some MNCs (mainly IT and financial companies) are exploring the possibility of permanently relocating outside of Tokyo.Some auto makers have already decided to set up new manufacturing centers in China. Although these are just individual cases at the moment, the profound effect that the earthquake and the nuclear fallout have on Japan and its neighboring countries will continue to show.
Andy Zhang, Managing Director of Cushman & Wakefield China, commented on the opportunities that Chinese cities face, “The unprecedented fast pace of urbanization and continuing economic development will drive up the demand for commercial real estate in China. The improving infrastructure in Chinese cities will also provide MNCs with more options for their development strategies in China, as well as in the whole of Asia. On the other hand, the office markets and industrial parks near the key cities will also benefit from the development. They will become an attractive low-cost solution for companies to locate their back offices, such as R&D centers, data centers, and call centers.”
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