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| The Flood of Foreign Capital Triggers the Rapid Development of Industrial Real Estate in Shanghai |
June 22, 2007 |
| These years the value of the industrial real estate is steadily on the increase. The industrial real estate includes both developed and undeveloped land used for industrial purpose, as well as constructions on and other attachments to the land such as workshop, warehouse and R&D buildings. The industrial real estate pales in comparison to residential and other commercial real estate. As a newborn in China, it has just come to the public attention recently. Previously this industry focused its attention on building workshops, now it has shifted its focus to environmental considerations and artistic aspects of the workshop. Thanks to its stable returns, this professional industry has been favored by the market with a year-on-year rent increase of 2.5 percent. According to a CBRE market report, China has strengthened its regulation on the land use for industry across the whole country since early this year. The average price of the land used for industrial purpose in Shanghai has witnessed a quarter-on-quarter growth rate of 3.2 percent, reaching RMB 879.4 per square meter. Driven by the growing land price, the rent for the industrial property also has seen a quarterly increase of 2.5 percent, reaching RMB 38.5 per square meter per month. According the analysis of Andrew Hatherley, CBRE managing director for Greater China, Shanghai’s rapid urbanization in a context of economic globalization, incentives for the development of logistics and the opening up of the banking and transportation industries after China’s accession to WTO have helped to bring new ideas and concepts about workshops into China, which contributes to the breath-taking growth of the industrial real estate in the past few years and the evolution of the logistics warehouse. Four Types of Demand Bring Workshops to Life Andrew Hatherley said that economic growth and government policies will further stimulate demand for industrial real estate in Shanghai, which will provide larger space for the sustainable development of Shanghai workshops. First, the development of manufacturing industry triggers demand for high-performance workshops. Bohai Rim Region, Yangtze River Delta and Pearl River Delta are three major economic centers of China, with Shanghai, which boasts RMB 1287 billion worth of industrial export, playing a leading role. The increasing demand for high-performance workshops has continued to improve their performance and the construction of workshops has become a new hot spot for investment. Second, the high-tech business parks also stimulate the development of industrial real estate. It is projected that more and more R&D centers will be set up in Shanghai in the next five years. Now, most of R&D centers concentrate in Jinqiao, Zhangjiang and Caohejing parks, which have advanced transportation and supportive facilities. Meanwhile, rent for Grade A office buildings in traditional business district, particularly in such districts as Lujiazui, is continually rising. In future, lots of offices of supportive service, such as banking call centers and business headquarters, will be moved to new business districts. Next, the development of logistics will increase the demand for workshops. The prospect for logistics, warehousing and distribution in Shanghai is quite optimistic. The development of Waigaoqiao and Yangshan Deepwater Port further establishes Shanghai as one of the biggest logistics centers across the world. China’s accession to WTO and more and more logistics tycoons conducting their operations in Shanghai will contribute to the growing demand for more logistics facilities. Finally, investment will boost the development of industrial real estate as well. Rental of workshops has a sustainable future, which attracts more and more foreign and domestic real estate investment companies to invest in this property. More and More Foreign Capital Goes to Industrial Property Investment. The formulation of the public bidding, auction and listing policy on the land use right transfer has caused the price of land used for industrial purpose and workshop rents to rise dramatically. Shanghai industrial real estate is becoming the apple of the investor’s eye. Foreign investors mainly put their money to the workshops in suburbs, but their capital is now shifting to the suburban industrial parks. Andrew said there are mainly two types of foreign-funded enterprises engaged in this business, one being enterprises engaged in logistics and warehousing, represented by the US Prologis in Shanghai, the other being enterprises engaged in development of industrial real estate, represented by Singaporean Ascendas, AMB and Caterpillar. What foreign investors are really concerned about are internationally recognized products, potential high-end tenants, stable returns, long term of rental and reasonable increase of rent. Foreign capital usually follows two modes of investment in industrial real estate. The first mode is to directly develop the real estate and then sell or rent to businesses for profit or rents. The second mode is an internationally common practice. The investors will first sell their workshops and then rent them back. This mode is mutually beneficial. Under this mode, domestic companies can increase the liquidity of their capital for further expansion, foreign investors can accelerate their entry into the China’s market. For instance, Japanese New City Corporation bought a warehouse of 260 thousand square meters in Waigaoqiao, the first acquisition of this company in China. http://info.winfang.com/news17934.html |
China Industrial Real Estate Club Address: Room 803-811 Oriental Plaza No.1500 Century Avenue Pudong 200122 Shanghai China Tel: +86 21 68407631 Fax:+86 21 68407632 Email:info@cireclub.com Web: www.cireclub.com Summit Web: www.ciresummit.com |