NEXT STOP: North Bund - Knight Frank · NEXT STOP: North Bund Location and Transportation Covering...
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Table of Contents04-05
Introduction
06
Location and Transportation
07-11
Supply
12-14
Demand
15-16
Rents
17
Sales
18-19
Opportunities and Risks
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NEXT STOP: North Bund
A20
A 20
Middle Ring Road
Middle Ring Road
Wenshui Road
Middle R
ing Road
Inner Ring Road
Inner Ring Road
Inner Ring Road
Yan’an West Road
Shanghai Railway Station
HongqiaoCBD
NanjingWestRoad
Lujiazui
HuaihaiMiddle
Road
People’sSquare
Xujiahui
NewHongqiao
ZhongshanPark
XuhuiBinjiang
Post-Expo
Qiantan
Changfeng
NorthBund
In this report, we address the
progress, functions and office
planning issues in the North Bund
Area. We explore future development
opportunities and prospects by
analysing the existing and future
tenant profiles, office rents and prices,
and competitive advantages and
strategic positioning of the area over
other emerging business districts.
Source: Knight Frank Research
Core CBDs
CBDs
Secondary BusinessDistricts
Emerging BusinessDistricts
Introduction In recent years, a number of emerging business districts with development potential have been identified by the Shanghai Government. Of these, the North Bund Area, which is located in the southern part of Hongkou District, is one of the most representative. After a dozen years of development, the area has been developed into a cluster of shipping and financial services businesses from originally just a shipping centre.
As Sinar Mas Centre, The Star Harbour and other landmark projects entered the market, there is an increasing demand for office buildings in the North Bund.
Figure 1Map of Shanghai’s Major Office Markets
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Location and TransportationCovering a total area of 64,088 sqm, the North Bund Area is located at the riverside in the south Hongkou District, with the Bund to the west and Lujiazui to the south across the river.
Both the Dalian Road tunnel and the
Xinjian Road tunnel, which connect
Puxi and Pudong, run through the
North Bund Area. Subway lines 4,
10 and 12 all lead to the area. Line
12 runs through the area with stops
at Tiantong Road, the International
Sipi
ng R
oad
Chang
yang
Roa
d
East Changzhi Road
Dalian Road
Hailun Road
Haining Road
Zhouji
azui
Road
Zhoujiazui Road
Sichuan N
orth Road
Xizang N
orth Road
Xinjian Road
Tunnel
Dalian Road Tunnel
Wusong R
oad
LINE
10
LINE
12
Tiantong Road Station
Hailun Road Station
Linping Road Station
Dalian Road Station
Tilanqiao Station
International Cruise Terminal Station
LINE
4
LINE
12LINE
19
Sichuan North Road Station
Baoshan R
oad
Figure 2Boundaries and Transportation in the North Bund Area
North Bund Area Line 4 Line 12
SupplyThe North Bund Area is one of the most important emerging business districts in the Shanghai office market with two construction booms.
The 1st Construction Boom
The 2ndConstruction Boom
2006 2007 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E2008
500
1,000
1,500
2,000
2,500
0
+ $
2005
Shipping Services Cluster Shipping and Financial Services Cluster
'000 sqm
The Establishment ofShipping and Financial
Services Cluster
The North Bund office market's
earliest development dates back
to 1997, when the Shanghai Bund
International Tower was completed.
After it was designated for shipping
in 2002, there was an inflow of a large
number of cargo service firms. This
consequently led to the development
Figure 3Historical Stock and Future Supply of Office Buildings in the North Bund Area (2005-2020E)
of a number of Grade B office
buildings. The years 2006-2008 saw
the completion of several high quality
Grade A office buildings, including
BM Tower and Ruifeng International
Building. Subsequently, office stock
increased by approximately 70,000
sqm per year, reaching 630,000 sqm in
2008, up 50% from that in 2005. From
2010 to 2012, with the establishment of
the North Bund Shipping and Financial
Services Cluster, the North Bund office
market saw a construction boom, with
a total of 530,000 sqm of office space
completed within two years, up 150%
from the period 2006-2008.
Line 10
Background and Current Status
Source: Knight Frank Research
Source: Knight Frank Research
12runs through the area with stops at Tiantong
Road, the International Cruise Terminal, Tilanqiao and Dalian Road.
L I N ECruise Terminal, Tilanqiao and Dalian
Road. The planned Line 19 will also
run through the area from north to
south.
Line 19 (proposed)
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After nearly 20 years of development, an office cluster was
formed in Sichuan Road, Wusong Road and the riverside
area. After being positioned as a shipping and finance
service cluster in 2011, the existing office buildings were
not able to meet demand for high quality office buildings,
so a number of high quality office buildings, including Sinar
Mas Centre and Landmark Centre, were constructed. By Q1
2017, total office stock in the North Bund Area reached 1.51
million sqm, with Grade-A office space amounting to 67%
of the total.
Figure 4Distribution Map of Existing and Planned Office Developments
Existing Supply
Future Supply
2 Citic Plaza
4 SMI Holding Building
7 SIPG Tower
8 Yuanyang Building
10 Sinar Mas Centre
13 Jiayu Building
15 Gang Yun Buiding
1 Haitai International
Building
3 Landmark Centre
Shanghai
5 BM Tower
6 Shanghai Bund
International Tower
3 Yifang Building
11 SCG Building
12 Eastern Harbour
International Building
14 Shanghai Point
16 Ruifeng International Building
6 Plot HK322-01
1 The Star Bund Centre
5 SIIC Project
2 Shanghai International
Shipping Service Centre
Middle Zone
Sichuan N
orth Road
Chang
yang
Roa
d
East Changzhi Road
Dalian Road
Hailun Road
Haining Road
Zhouji
azui
Road
Zhoujiazui RoadBaoshan R
oad
Wusong R
oad
Xinjian Road Tunnel
Dalian R
oad Tunnel 9 Shanghai International
Cruise Terminal Port
Authority Building
Source: Knight Frank Research
4 Sino-American T.&F.
Tower
3
5
6
1 0
12 1416
21
4
4 78 9
311
13
15
615
2
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Star Harbour
Co-developed by SIPG (Shanghai
International Port Group) and
Franshion Properties, Star Harbour
consists of the Shanghai Port
International Cruise Terminal,
Shanghai International Shipping
Service Centre, Star Bund Centre,
and three million sqm of Grade-A
office buildings. The Shanghai Port
International Cruise Terminal boasts
13 buildings, while the Shanghai
Sinar Mas Centre
Another important commercial area
in North Bund is Sinar Mas Centre
area. As a landmark building in North
Bund, Sinar Mas Centre is comprised
office buildings, shopping centre and
a luxury hotel. Sinar Mas Centre has
a total GFA of approximately 420,000
International Shipping Service Centre
has 19 buildings (all to be completed
in 2017). Both projects are for sale;
their target buyers include central
government-owned and large state-
owned enterprises. Most buyers
hold these office spaces for self-
occupation, and rest will be leased
out. The Star Bund Centre, which is
located on Haimen Road, plans to
develop two 263-metre-skyscrapers,
which will be landmark buildings in
the North Bund Area. The Shanghai
Port International Cruise Terminal
and Shanghai International Shipping
Service Centre comprise one of
the major development projects
in the area, with total office space
amounting to 34% of total office
stock. Furthermore, a 130,000-sqm
shopping centre in Star Bund Centre
is scheduled for completion in 2019.
sqm, of which office space accounting
for 130,000 sqm. The office tower
phase one in Sinar Mas Centre was
completed in Q1 2017, adding a total
of 65,000-sqm office space to the
market. In addition, Sinar Mas Centre
has introduced Starwood's luxury
boutique hotel brand W Hotel and
will open a retail mall of 70,900-sqm
in future. At that time, the ancillary
facilities in Sinar Mas Centre Area
and Star Harbour Area can meet
the requirements of the office and
residential population in the area.
The office market in the area will reach another construction peak in the coming four years. In 2017-2020, new office supply will reach an average of
It is estimated that there will be 1,030,000 sqm of new office space completed in 2017-2020, while office stock will increase to
The SIIC Project, Star Bund Centre Phase II of Star Harbour, and Sino-American T.&F. Tower will be launched by 2020.
Landmark Developments
Sino-American
T.&F. Tower
( under constuction)
The Star Bund Centre
(under construction)
Shanghai International
Shipping Service Centre Area
Yifang Building
Sinar Mas Centre
Shanghai International
Cruise Terminal Area
SIIC Project
( proposed)
257,000 sqm per year.
sqm by 2020. 2,350,000
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DemandIn the decade from 2006-2016 office demand continued to drive down vacancy in the North Bund Area.
Figure 5: Office Supply, Net Absorption and Vacancy Rates in the North Bund Area (2006-2020E)
2018E2017E20072006 2008 2009 2010 2011 2012 2013 2014 2015 2016 2019E 2020E
800
600
400
200
0
-200 0%
10%
20%
30%
40%
Of�ce Supply ( left )
Net Absorption ( left )Vacancy Rate ( right )
‘000 sqm
In Q1 2017, two office buildings, the
Sinar Mas Centre and Landmark
Centre, were completed, adding
180,000 sqm of new office space.
The overall vacancy rate stood at
approximately 10%. In the future, the
office vacancy rate in the area will rise
slightly because of upcoming projects,
such as the Star Bund Centre,
International Cruise Service Centre
and Sino-American T.&F. Tower.
The major tenants in the North Bund
Area are shipping companies and
large and mid-sized domestic financial
companies. Shipping companies
were the first to set up in the North
Bund Area. Following the completion
of the Shanghai International Cruise
Terminal, shipping companies like
Cosco Group, China Shipping Group
and SIPG successively moved into
the area. As of Q1 2017, up to 4,500
shipping companies were operating in
the area, for a compound annual rate
of 7.1% over that of 2012. When the
government proposed establishing a
financial industry cluster, a number
of PE firms moved into the area,
including SDIC (State Development
& Investment Corporation), the
headquarters of PSBC (Postal Savings
Bank of China), NCI (New China Life
Insurance) and JIC (Jianyin Investment
of China Group). The number of
financial companies reached 1,200
by Q1 2017, which amounted to a
compound growth rate of 43% over
that of 2012. Currently, the North Bund
Area is a business district dominated
by shipping and financial companies.
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
02012 2013 2014 2015 2016 *Q1 2017
0 %
20 %
40 %
60 %
80 %
100 %
120 %
$$
$$ $
$
Shipping companies ( left )
$Financial companies ( r ight ) Growth rate of �nancial compaines ( r ight )
Growth rate of shipping companies ( left )
No. of companies
Figure 6:The number and growth rates of shipping and financial enterprises in the North Bund Area
Background and Current Status
Source: Knight Frank Research
Source: Knight Frank Research
In Q1 2017, the overall vacancy rate in the North Bund Area stood at approximately
10%
Note: *refer to figures estimated by Knight Frank
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The average office rent reached
RMB7.30 per sqm per day in Q1 2017,
up 92% over the last decade. The gap
in Grade A office rents between the
North Bund Area and the city-wide
Grade-A level also narrowed, from
RMB4.90 in 2008 to RMB2.50 in Q1
2017.
Figure 8: Average office rental trends by business district (2006-Q1 2017)
In terms of tenant profile, office
demand in the area is in large measure
the result of government policies. In
2011, the authorities issued an official
document to reinforce the financial
cluster concept, resulting in the entry
of large financial institutions, including
SDIC, NCI and ICBC. Although
shipping and cargo agents remained
the majority, financial institutions such
as public funds and banks increased
to 9% of total tenants in 2012. In
2017, the number of tenants engaged
in wealth management and financial
investment grew rapidly, with the
proportion increasing threefold over
that of 2012, followed by shipping
and logistics (42%) and cargo agents
(16%).
Q1 201720072006 2008 2009 2010 2011 2012 2013 2014 2015 2016
0
2
4
6
8
10
12 Overall North BundEmerging business districtSecondary business districtRMB/ sqm/ day
RentsOffice rents in the North Bund Area have risen significantly in recent years as a number of large SOEs and financial institutions moved in.
Tenant Profile
3%
9%
9%10%
11%
18%
40%
2012
Shipping and Logistics
Professional Services
Public Funds / Banks
Freight Agency
Wealth Management / Financial Investment
Trade
Others
3%
5%
10%12%
12%
16%
42%
2017
V S
Figure 7: Tenant Profile in the North Bund Area (2012 vs 2017)
Source: Knight Frank Research
Source: Knight Frank Research
7.30In Q1 2017, the average office rent in the North Bund Area reached
per sqm per day.
RMB
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Office rents in the area rank 6th
among the major business districts
in Shanghai, 58% of that of the top
ranking Lujiazui Area. The average
rent in BM Tower is RMB7.50 per sqm
per day and Ruifeng International
Building is RMB6.50 per sqm per
day. Office rents are expected to
continue to increase due to the supply
of high quality office space in the
coming years. Currently, the asking
rent in Sinar Mas Centre, which was
completed in Q1 2017, ranges between
RMB10 to RMB12 per sqm per day.
The North Bund Area is one of the
most active areas in the office sales
market. According to Knight Frank,
55% of the offices in the area are for
sale, including 76% for en-bloc sales
and 24% for strata-title sales. Share
transfer and direct sales are the two
major channels for en-bloc sales. For
example, Shanghai Port International
Cruise Terminal Tower 1 was sold to
Baosteel Resources and Shanghai
Port International Cruise Terminal
Tower 2 was sold to Huafu Investment
Group through share transfers. China
Shipping Development and State
Development and Investment Yahua
directly purchased Shanghai Port
International Cruise Terminal Tower 5
and Tower 3. Shanghai Point is now
available for en-bloc sales.
There are only a few office buildings
designated for strata-title sales in the
area. Currently, only three projects
– Above the Bund Plaza, Greenland
North Bund Centre and Yaojiang
International Plaza – with unit sizes
ranging from 180 to 200 sqm, are
available for small investors to
purchase for self-use or investment.
Most sales projects are situated in
the Shanghai Port International Cruise
Terminal and Shanghai International
Shipping Service Centre area, with the
average unit size below 20,000 sqm.
In November 2016, State Development
and Investment Group acquired
an office building in Shanghai
International Shipping Service Centre,
located at No.168 Yangshupu Road,
with a total gross floor area of 64,496
sqm for a total consideration of
RMB5.288 billion and a unit price of
over RMB80,000 per sqm.
The major tenants are shipping
companies, including CSDC (China
Shipping Development Company),
Cosco Group and Pacific International
Lines. For shipping and logistics
companies, the North Bund Area is
the best destination for headquarters.
The current sales price in BM Tower
starts at RMB35,000 per sqm, while
the price of the last phase of Yaojiang
International Plaza is RMB25,000 per
sqm.
SalesMost office buyers in the North Bund Area are large central government-owned or state-owned enterprises, and the industry leaders for self-occupation purposes.
Office rents are expected to continue to increase due to the supply of high quality
of f ice space in the coming years.
14
12
10
8
6
4
2
0
12.5
11.611.0
9.9
7.7 7.3 7.1 7.06.5
Lujiazui NanjingWest Road
HuaihaiMiddleRoad
The Bund Xujiahui NorthBund
Changfeng XuhuiBinjiang
HongqiaoCBD
RMB/sqm/day
Figure 9: Office Rents in Major Business Districts, Q1 2017
Source: Knight Frank Research
58%Office rents in the North Bund Area is
of that in Lujiazui Area
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Conclusion
Opportunities and RisksAs compliments to traditional CBDs, new CBDs are under supply pressure and face fierce competition in attracting investment during their development. Apart from North Bund, there are a number of new CBDs emerging, including Qiantan, Hongqiao CBD, Xuhui Binjiang and Changfeng Ecological Business District.
Clear positioning
The positioning of the North Bund Area is fairly clear: i.e. a shipping service cluster aiming
to develop and encourage shipping and related services. It is also the only emerging
business district that is positioned as a shipping services cluster in Shanghai. To avoid
duplication, the North Bund Area intends to differentiate itself from innovation and culture-
themed Xuhui Binjiang and modern services and international trade-themed Hongqiao
CBD.
Sizable office stock
Currently, there is approximately 1.51 million sqm of total office stock in the North Bund
Area. With an additional supply of 840,000 sqm under construction or planning, total
office stock is expected to reach 2.35 million sqm by 2020. This is twice the size of the
Changfeng EBD (Ecological Business District) and 2.8 times that of the Xuhui Binjiang
Business District, topping the list of emerging CBDs in Shanghai. A large-scale office
market will attract more multi-floor tenants, bringing economy of scale.
Convenient location close to the city centre
Compared with other emerging CBDs located in the central and outer rings, the North
Bund Area is the only emerging CBD that lies in the inner ring with easy accessibility. Many
core CBDs, including Nanjing West Road, Huaihai Middle Road and the Lujiazui Financial
Area, are only a 15-minute drive away.
Higher rental expectations
At the moment, with the support of shipping and financial enterprises in the North Bund
Area, the average office rent is RMB7.3 per sqm per day, close to the average rent of all
CBDs. While the average rent of other emerging CBDs, such as Hongqiao CBD, Xuhui
Binjiang and Changfeng EBD, ranges from RMB 6.0 and 7.1 per sqm per day, they still lag
behind those of the North Bund Area.
As the earliest emerging CBD, the development process of the North Bund Area has been relatively slow
After its establishment in 2002, the North Bund Area attracted only shipping
and logistics companies, giving rise to a relatively small office market size and
a slow development pace. Only after the announcement that a shipping and
financial services cluster would be established in the North Bund Area did a
number of large-scale financial institutions and financial services enterprises
move in. It was this diversity of tenants that kickstarted the faster pace of
development.
Only a few connecting metro lines so far
Although three Subway lines lead to the area, at present, only Line 12 operates
in the North Bund Area. This results in congestion at rush hours for office
workers.
Old existing buildings adversely affect the overall developing plan
A great number of listed buildings in the North Bund Area cannot be
demolished or removed easily, resulting in conflicts in the overall developing
of the area, which negatively affects the overall development plan of the
North Bund office market.
As one of the emerging business districts,
the North Bund Area differentiates itself
from other nearby office clusters. Lujiazui
in Pudong and the core CBDs in Puxi
remain the first choice for financial and
consultancy companies. It would be hard
to persuade shipping companies to move
from the North Bund Area to Lujiazui or
Nanjing West Road and Huaihai Middle
Road in the city centre. Therefore, the
North Bund Area will continue to attract
more shipping and related industries,
including transportation, trade, insurance,
finance and leasing.
It is worth noting that the success of the
North Bund Area relies on the efforts
and collaboration of various parties.
Governments are expected to provide tax
incentives to attract intensive investment
from the shipping trade and related
industries. Developers are expected to
look ahead and to develop long-term
leasing strategies and improve building
management to maintain the quality
of the properties. Tenants and buyers
should consider the positioning and
developing potential of the North Bund
Area. Companies in the shipping trade and
related industries are recommended to
move to the area in order to benefit from
industry agglomeration.
The North Bund Area is still developing,
but as part of the core construction area in
Hongkou District, there have already been
built or there are plans to build several
landmark buildings, including Shanghai
International Shipping and Financial
Services Centre, Sinar Mas Centre, Star
Bund Centre, Shanghai Landmark Centre,
and Suning Bellagio Hotel Tower. In the
future, the military pier will also be open
to public, as part of a navy theme park to
provide an educational base for national
defense and a recreational complex with
quality cultural and physical activities.
According to the plans, the North Bund
Area will ensure a staggered competition
market with the Bund, Lujiazui, and
Yangshan Deep Water Harbor, further
building on its five major pillars, including
an agglomeration of shipping and finance
headquarters, a passenger cruise centre,
a harbour service centre, and a cultural
and innovation centre. Some 840,000
sqm of Grade A office space will be built,
equivalent to the size of an entire CBD in
Shanghai.
Opportunities
Risks
Recent maRket-leading ReseaRch publications
RESEARCH & CONSuLTANCy
David Ji Director, Head of Research & Consultancy, Greater China +852 2846 9552 [email protected]
Regina yang Director, Head of Research & Consultancy, Shanghai +86 21 6032 1728 [email protected]
Vincent Li Assistant Manager, Research & Consultancy, Beijing +86 10 6113 8017 [email protected]
Ocean Ruan Senior Manager, Research & Valuation, Guangzhou +86 20 3839 6408 [email protected]
Martin Wong Associate Director, Research & Consultancy, Greater China +852 2846 4184 [email protected]
Cliff So Executive Director, Agency & Professional Advisory Services, REPro Knight Frank, Taipei +886 2 8729 8770 [email protected]
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