LOBAL DIGEST
China’s Property Market On Growth Path
China’s secondary and tertiary markets will begin to play a greater role in the coun-
try’s real estate industry. As a result, the property market there could quadruple
in size by 2020. Those are the findings of a recently released report by Jones Lang
LaSalle, “China 40: The Rising Urban Stars.”
“China’s Tier II and III cities are dynamic centers of economic development and
growth,” says Michael Klibaner, head of research in Shanghai for Chicago-based
JLL. “Massive infrastructure investment makes these markets increasingly accessible
at a time when interest in China has shifted from exports to the domestic market.”
JLL analyzed the top 40 Tier II and III cities that will be on the radar for investors
in the years to come. For office properties, the top three are Tianjon, Chongqing
and Nanjong; in retail, the best performers were Changsha, Wuhan and Wenzhou;
and Chengdu, Qingdao and Zhengzhou were the lead locations for logistics.
“The future evolution of China’s cities and their real estate markets will be driven
by a rich combination of factors that are strongly influenced by government policy,”
the report states. These policies focus on urbanization, with plans in place to see
the city population explode to 850 million people by 2020. “The government’s ideal
end vision is a countrywide network of environmentally sensitive cities, each with its
unique competitive advantages and strong trading connections.”
While China’s stock of grade A office space is small—about 39. 4 million square
“The government’s end vision is a countrywide
network of environmentally sensitive cities,
each with its unique competitive advantages.”
feet, roughly the size of Washington, DC’s entire office supply—that inventory is
expected to grow to 68.9 million square feet by 2011. Half of the new space is in
Tier II and III cities, and real estate advisors, insurance services and the banking
sector are driving demand.
“Although investors are currently adopting a cautious approach due to the
limited amount of international standard space on the market and the opaque
business environment, they are universally confident about growth prospects over
the next decade,” says Tammy Tank, JLL’s head of business parks in China. “We are
confident that more business park hotspots will emerge as experienced developers
and investors penetrate further into China’s Tier II and III cities.”
Meanwhile, some players in China are taking cues from the US in terms of invest-
ment. Publicly traded development firm Canada Land Ltd. is creating a fund to
focus primarily on distressed assets throughout China. With leverage, CDL China
Real Estate Opportunity Fund, should be able to invest $1 billion, according to
William Nobrega, managing partner of the Conrad Group, an advisor to CDL.
“The current global economic downturn and numerous fundamentals have set
the stage for one of the most lucrative investment opportunities in recent years
and in the history of Chinese real estate,” says William Yip, chairman of CDL. He
adds that the Hong Kong-based firm’s investment strategy will focus primarily on
mid-tier multifamily developments, as well as potential plays in the mixed-use and
commercial arenas, in Tier I and II cities in the Pearl River basin.
The fund is slated to close by the end of the third quarter, and investment should
begin at that time or by the beginning of the fourth quarter.—Katie Hinderer
CALLISON HEADING UP
$10B JORDAN DEVELOPMENT
Aqaba, Jordan—Design firm Callison is
heading up the master planning for Marsa
Zayed, a 60-million-square-foot, mixed-use
project here. The developer of the $10-bil-
lion asset, set to break ground by midyear,
Marsa Zayed
is Al Maabar Jordan Investments, an arm of
Abu Dhabi-based Al Maabar International
Investments. Marsa Zayed will be done in
phases as the Jordanian government hands
over land for the project. The first two hand-offs are scheduled for this year, and the third
and final transfer is set for 2013. Al Maabar
acquired the land from the government
last year for $500 million. About 32 million
square feet of the project will be comprised
of residential, office, retail and entertainment
space. Hotels and a cruise-ship terminal will
make up the remaining space.—Ian Ritter
DAWNAY DAY PORTFOLIO
CHANGES HANDS FOR $832M
London—The 3.4-million-square-foot
Dawnay, Day Group UK portfolio has
changed hands to the tune of $832 million.
F&C REIT Asset Management and AREA
Property Partners have agreed to purchase
the fallen investment company’s holdings.
The selling price was not disclosed but
sources say the reported price tag is on the
money. Investors had been eyeing the 211
assets, 70% of which are retail, since last
summer, when Dawnay Day became one
of many floundering companies. Over the
summer, Norwich Union, the firm’s primary
lender, placed Dawnay Day into administration and appointed BDO Stoy Hayward to
administrate the portfolio.—Katie Hinderer
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