Chinese business park sector booms
With a development of little more than 10 years, the business park sector in China is still in its infancy. However, a new report says that as the property market responds to the increasing requirements for high-quality decentralized business space, the sector now is firmly poised for lift-off.
Recently, international property consulting and management firm Jones Lang LaSalle conducted deep research into the sector and published a report to review the future growth, identify the likely business park hot spots and assess how the landscape is going to evolve over the next few years. The report tells that business parks today are generally characterized by suburban areas and mixed building types, which continue to be built in accordance to very different requirements in terms of different quality and working environment.
China’s emerging business park sector is strengthening occupiers’ demand for high-quality business space in China. This is supported by expansion of research and development activities of high-tech and pharmaceuticals firms seeking high-specification space, by the fast growth in business process outsourcing (BPO) industry, and by huge demand of multinationals for campus-style space outside high-cost CBD locations. Demand is further boosted by the strategy of the government. That is moving the Chinese economy up the value chain and its policy of mapping out R&D and BPO clusters across the country.
“The stock of business park space in China, which is estimated to stand currently at about 17 million sq m, is expected to more than double to around 38 million sq m by 2010. Over 60 percent of the current stock is located in the four cities of Shanghai, Beijing, Dalian and Guangzhou,” said Jileen Loo, head of business park sector for Jones Lang LaSalle China. Apart from these, over the next few years, many other cities such as Chengdu, Suzhou, Xi’an and Tianjin will increase sharply in business park activities.
Hot spots
These cities has been grouped by property firm in to three market types, each offering different opportunities and characteristics for occupiers, developers and investors.
The first type is prime markets, including Beijing and Shanghai, which are the most transparent markets and are currently favored by established players and new market entrants such as Goodman, CapitaLand, Shui On and Frasers Property. These two municipalities account for more than one third of China’s current business park stock and are host to China’s most high-profile parks. The rapid expansion of R&D activities, growth in back-of-fices and the decentralization of business activities from CBDs support the robust occupier demand.
The second type is transitional markets, such as Dalian, Chengdu and Hangzhou. They are gradually catching up with the prime markets as they are developing their niche markets to differentiate from the prime markets, especially in BPO activities.
The third type is the first-mover-advantage market, for example, Tianjin, Jinan and Chongqing. Those cities have lower levels of business park activities while their governments have afggresive plans for expansion, and they offer generous incentive for new entrants in order to attract high-quality tenants and experienced developers. Loo said, due to the strong government support and the presence of multinational companies, they believe Tianjin has the potential to develop as a robust business park market.
Developers and investors
The business park sector is now attracting international developers and investors, which reflects the prosperous long-term demand fundamentals offered by business parks and caused by strong competition as well as tighter regulations in commercial property.
Ascendas, Goodman, Frasers Property, Shui On and CapitaLand have been the most active international developers. Lots of US investors such as GE, Blackstone, Morgan Stanley and Goldman Sachs have showed their interest in business park sector.
“The credit crunch affecting the US market in 2008 is putting a new spotlight on investment opportunities in China, but the long-term impact on the China businesses park investment market remains to be seen,” said Stuart Ross, head of Industrial China for Jones Lang LaSalle.
So far, there are very few dedicated domestic business park developers. However, the chances offered are starting to attract more local players, such as Raycom and TechPark Development.
By now, there are only a limited number of projects on the market that meet international standards. But most investors are adopting a cautious approach. They are confident about the prospects in the next five years.
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