SHANGHAI, CHINA--(Marketwired) - Colliers International Group Inc. (NASDAQ: CIGI)(TSX: CIG), a global leader in commercial real estate services, released a whitepaper today titled "The New Bund - Plans and Possibilities for Qiantan". In the report, Colliers analysed the development plan, current situation and future development potentials of Qiantan (or "The New Bund") from the perspectives of office, retail and residential markets. It is founded that the Qiantan office market will benefit from the fast development of Pudong and finance sector, in addition to benefiting from the ongoing decentralisation of traditional sectors such as manufacturing. As for the retail market, Qiantan's partnership with well-known developers including Swire Properties, Tishman Speyer and Hongkong Land, is helpful in attracting retailers, which will in turn develop the area into a new retail catchment in Shanghai. On the residential side, given the great demand for high-end housing in Shanghai in recent years, Qiantan residential development is likely to draw strong interest from high net worth individuals and investors seeking high quality residential properties.
The government's master plan expects Qiantan to become a new core international business community in Pudong with 3.5 million sq m of commercial and residential real estate after completion in 2020.
Office: To benefit from the development of finance sector and decentralisation of traditional sectors
Commercial real estate will anchor the Qiantan area. Dozens of office developments totalling approximately one and a half million sq m are planned in Qiantan. The first building broke ground in 2013, and the first wave of office supply, a total of more than 240,000 sq m office GFA, is scheduled to complete in 2017. Qiantan has the potential to benefit from Pudong's continuing development and the city's healthy service sector. The area has a number of advantages over other office clusters that may develop in Shanghai, including infrastructure, scale, the reputation and experience of developers and the Lujiazui Group, government support, and its inclusion in the Free Trade Zone.
The Pudong CBD (central business district) has a low vacancy rate of just 4.8% in 2015. Since the finance sector is a major source of new office demand in Pudong, Qiantan is also expected to benefit from the rapid development of the finance sector and the ongoing decentralisation of tenants from traditional sectors such as manufacturing. "Qiantan is attractive to smaller players of the financial industry, such as the fast growing digital payment sector. By locating in Qiantan, these financial firms will benefit from the close proximity to Little Lujiazui while enjoying a lower rental cost," says Derek Lai, senior director of Office Services in East China, Colliers International. In addition, Qiantan may also attract businesses that have ties with the state-owned enterprises which will open headquarters in the former World Expo area.
Qiantan may have a cost advantage relative to most CBD areas. But it was found in the survey that the respondents' awareness of Qiantan was limited as the majority were unfamiliar with basic details, such as its exact location, the transportation connections and a general plan for the area's development. Sixty percent of respondents said they would consider relocating to Qiantan despite of various concerns over cost, public transportation and amenities.
Colliers' director of Research in China, Carlby Xie, comments that "Qiantan will face strong challenges from massive supply scheduled in other decentralised areas where, in some cases, amenities and transportation networks are more established. Therefore the positioning of the area by its planners and developers and their success in establishing its reputation as a convenient, high-quality area for doing business will be critical to its success."
Retail: To become a new catchment for brands with well-known developers racing to seize market opportunities
Lujiazui Group plans to build approximately 600,000 sq m of aboveground retail real estate in Qiantan by 2022, including shopping centres, pedestrian streets and retail podiums by 2022. Based on the forecast residential real estate prices and the government's stated goal to position Qiantan as a high-end area, the planned population of approximately 25,000 residents are expected to have above-average spending power.
A large-scale survey of retailers undertaken by Colliers found that retailers showed interested. Some of the retailers from the F&B and entertainment industries said they have already conducted their own market research on the Qiantan area. However, certain retailers are cautious towards the Qiantan area, as public information is fragmented and often vague. "Although Qiantan meets the population benchmarks for many industries to consider opening a store, the majority of brands place considerable importance on the quality of the retail development itself when deciding where to expand. This includes the development's design, the reputation of the developer and it's potential to draw customers," explains Annie Houn, director of Retail Services, Colliers China.
Carlby Xie says, "The success of Qiantan retail market will largely depend on the execution, management and positioning of the area. The Lujiazui Group's partnership with well-known developers Swire Properties, Tishman Speyer and Hongkong Land is an encouraging sign. I believe Qiantan has great potential to become a new retail catchment for brands in Shanghai."
Residential: To build a high-end community that will attract affluent buyers and investors
Qiantan will have a residential component in addition to its commercial development, primarily aimed at affluent buyers and investors in Shanghai's luxury residential market. Plans for the area show that a total of 8,300 residential units (877,000 sq m) will be built in Qiantan by 2022. Six land sites in Qiantan have been sold to date. Construction began on three sites in 2014 and the first wave of supply (1,531 units, or 146,000 sq m) is scheduled to complete in 2017. Gree Real Estate and the Sanxiang Corporation have been the only outside developers to acquire purely residential land in the Qiantan area. The remaining transacted sites will be developed by the Lujiazui Group, either directly or with capital from outside investment companies.
A review of the completed sales contracts for four residential land sites shows that the average accommodation value for these plots is more than RMB63,100 psm. Based on Colliers' valuation model, this suggests that units at these developments will sell for approximately RMB110,000-130,000 psm. This strategy would be consistent with other residential developments alongside the Huangpu River.
In addition, the official statement shows that a portion of the residential development will only be available for lease, in order to attract foreign nationals (presumably employees and managers of companies who lease office space in Qiantan), who are likely to prefer leasing to purchasing. "Indeed, contracts for two completed land sales stipulate that units will be available for lease only. However, given the large volume of planned housing, it is expected that the majority of residential units will be offered for sale," says Timothy Chen, Colliers' director of Advisory Services in East China.
Carlby Xie comments, "As Qiantan can offer unmatchable high-end residential property with riverside views, the new development is likely to draw strong interest from Chinese home owners and/or investors seeking high-end housing. Sales transactions for such apartments in Shanghai have shown fast growth in recent years, and barring any major economic downturn or abrupt policy change, demand for such units is expected to be strong."
To read the whole report of "The New Bund - Plans and Possibilities for Qiantan", please click here.
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Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is an industry leading global real estate services company with more than 16,000 skilled professionals operating in 66 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting.
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