The decades-long commercial real estate boom that created the so-called Greater Bay Area is set to continue, and expand beyond the main hubs of Shenzhen and Guangzhou.
The Grade A office market in Shenzhen is expected to almost double from around 7 million square metres in 2019 to 14 million square metres over the next five years, according to JLL.
In February, the central Chinese government announced its blueprint to link Hong Kong and Macau with nine other cities in the Southern Chinese province of Guangdong into an integrated “Greater Bay Area” – an economic and business hub around the Pearl River Delta. The mainland Chinese cities that will be connected with the new development are Guangzhou, Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguan, Huizhou, Jiangmen and Zhaoqing.
As Shenzhen and Guangzhou – the two largest mainland Chinese cities in the Greater Bay Area –further transition their economies up the value chain, they will benefit from the corporates increasing investment and expanding their office footprint in the economic hub, says Silvia Zeng, Head of Research for South China at JLL.
The rapid development will put many expanding corporations under pressure to attract and retain talent.
“Commercial buildings will need to be designed and built to cater for the future workforce. Developers should consider building not only green buildings, but also those that are designed with the health and well-being of the occupants in mind,” says Denis Ma, Head of Research for Hong Kong at JLL.
Shenzhen and beyond
Around one-third of companies operating in the Greater Bay Area surveyed by JLL see Shenzhen as the city with the greatest potential for their business over the next 5 to 10 years.
Shenzhen is already the home of China’s high tech, advanced manufacturing, and FinTech sectors, driven by domestic giants such as Tencent, Ping An, and China Merchants Bank.
And the city has enduring appeal outside China too. Close to 300 Fortune 500 companies, including Wal-Mart, Apple and Amazon, are already invested or operating in the city.
The continued development of the services sectors in Shenzhen as well as Guangzhou will further attract both domestic and foreign capital. The expected jump in demand for workplaces will be met by a significant increase in stock in the near future. A projected 22 million square metres of offices in the Greater Bay Area will become available over the next five years, according to JLL data.
Grade A office net absorption in the Greater Bay Area (2014-2018 average vs. 2019-2023 average)
While Beijing’s vision for the Greater Bay Area has piqued the interest of foreign investors, the bulk of cross-border real estate investments made in the region to date have largely been restricted to the three most developed cities in the area.
Hong Kong, Guangzhou and Shenzhen attracted 85 percent of the total cross-border real estate investments made since 2009, JLL data has found.
“This alone indicates that there is still a significant amount of untapped investment potential in real estate markets within the Greater Bay Area,” says Ma.
The maturing of the area’s transportation system will help facilitate some of that untapped potential, says Ma, particularly around transit-oriented developments along the area’s sprawling high-speed rail network.
The real estate markets around Guangzhou South Station, Shenzhen’s Futian District and Guangzhou’s Nanshan District are already benefitting from the opening of the Guangzhou–Shenzhen–Hong Kong Express Rail Link (XRL). According to JLL research, the Houhai and Qianhai precinct in Shenzhen, and Pazhou precinct in Guangzhou will see a steady uptick in the net absorption of offices and rents over the next five years because of greater connectivity.
Fastest-growing business districts in the Greater Bay Area (As of 2Q 2019)
Precinct Rent (net effective, HKD/sq. ft./month, GFA)
Houhai District, Shenzhen: 26
Qianhai District, Shenzhen: 15
Pazhou District, Guangzhou: 15
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