World Winning Cities China Master Presentation
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Transcript of World Winning Cities China Master Presentation
World Winning Cities
World Winning Cities Programme
China: Emerging City Winners
World Winning Cities in China
China Context Economy Investment
China 30
China Logistics
China Retail
City Cobwebs
China: Emerging City Winners
Changing Perceptions
Some things you may know about China….
…..and some things you probably didn't
The Western View of Chinese Markets
• Too much to choose from – where do you start?
• Nothing familiar – where are the sale and leasebacks and the REITs
• Partnerships – necessary, but difficult
• The banks are bankrupt
• There is no management skill and few trained staff
• They want long term investment monies not short term real estate investment
The Chinese View of Western Approach
Strengths:
Prudent in investment decisions making
Good at risk management
Weaknesses
Slow to respond to Chinese partners proposals
Require Chinese partner to do too much time consuming paperwork
Eager to have final say on everything, but fail to understand the market
Slow to amend marketing strategy in a rapidly changing market
Don’t understand gov’t approval process & unwilling to work within it
But China has come far: The History of Property Investment
1988 1989 1990 1991 1997 2005 2006
P&G enter Market/ Land lease system established
Shanghai Centre - First real property project
Macquarie GPA deal kicks off hard asset investment
1988
1990
2005
The property market since open policy
2003
Asian Financial crisis scares investors away1997-8
Case Study: Shanghai Centre (Completed 1990)
First international property investment deal
AIG, Kajima, Portman
5-star hotel, serviced apt, grade A office, retail
Hank Greenberg AIG & John Portman, Portman Group personally involved
Case Study: Plaza 66 (Completed 2001)
2001 – Phase 1; 2007 – Phase 2
66 Floors of MNC tenants
5 Floors of Luxury brands
Vast majority of Chinese couldn’t buy anything in this center
Is it profitable, or just a ‘showcase’?
Hang Lung hopes to roll out 10 more mixed use projects over the next 3 years
Case Study: Morgan Stanley Deal
A very difficult & time consuming deal, but showed perseverance
Strata title building, poorly managed & positioned
Morgan Stanley & local partner consolidate strata title ownership
Have been able to double rents, reposition retail
Just signed key anchor tenants – insurance group (8,000 sqm)
Weight of money targeting China
• International funds have announced more than US$ 30bn of investment targeting China
• Majority of funds are from Chinese, Hong Kong, Taiwanese & Singaporean investors
• ‘Western’ money continues to principally target highly competitive markets in Yangtze Delta – especially Shanghai. Some interest in Beijing.
• ‘Asian’ cross-border investors continue to target Guangdong and Tier II and III cities – first to enter strong growth markets.
• Tier II and III cities only offer development opportunities
Weight of Money Targeting China
Foreign Investors in China
2005 ‘Prime’ Real Estate Investment in China
Total > US$ 5.5bn
BeijingTianjin
ShanghaiHangzhou
Nanjing
Other
Guangzhou/Guangdong
China - Yield Convergence?
2%
4%
6%
8%
10%
12%
14%
1998 1999 2000 2001 2002 2003 2004 2005 2006
Shanghai
Beijing
Prime Property Yields: China
China Context Economy Investment
China 30
China Logistics
China Retail
China: Emerging City Winners
Shanghai, Beijing, Hong KongGuangzhou, Shenzhen, Macau
Chongqing, Chengdu, TianjinWuhan, Xi’an, Qingdao, SuzhouShenyang, Hangzhou, Nanjing,Dalian, Dongguan, Xiamen
Harbin, Zhengzhou, FuzhouNanning, Wuxi, ChangshaKunming, Jinan, Ningbo, NanchangHefei, Changzhou, Changchun
II
IIIIII
II
I
China’s Cities Hierarchy
Traditional Focus of Economic Activity
BBohai Economic Zoneohai Economic Zone•Administrative Capital•Science & Technology•Higher Education•Culture/Tourism•Olympics 2008
Pearl River DeltaPearl River Delta•Trade capital•Manufacturing FDI•External Links•Special administrative regions•Tourism •Zhujiang New City•Asia Games 2010
Yangtze River DeltaYangtze River Delta• Financial Capital• Pudong “Development Zone”• Port development• Expo 2010
Shift in Policy Emphasis onto Tier II cities
8th 5YP(1991-1995)
• Consolidate Five SEZ
• Open Pudong New District
9th 5YP(1996-2000)
• Concept of “Go West” and central China development Policy
10th 5YP(2001-2005)
• Official launch of “Go West” policy• Policy to “Revitalize Old Industrial Base”
11th 5YP(2006-2010)
• Re-emphasize on Chengdu-Chongqing axes
• Position Tianjin as Economic Centre in North China
DongguanQingdao
ShenyangXiamenSuzhouNanjing
ShenzhenTianjinDalian
ChengduXi’an
GuangzhouWuhan
HangzhouChongqing
ShanghaiBeijing
Hong Kong Macau
0 2 4 6 8 10 12 14 16 18
Tier I and II Cities: GDP Growth
Tier I Tier II
% 2005
Strongest Economic Growth in Tier II cities
II
III
Foreign Investors Move Across China
The Beginning: Hong Kong
Wave One: Beijing, Shanghai Guangzhou
Wave Two: Chengdu, Chongqing, Dalian, Hangzhou, Harbin, Jinan, Macau, Shenyang, Suzhou, Tianjin, Wuhan, Wuxi, Xian, Xiamen
Real Estate Capital Flows move to Tier II cities
Signals of Change: Retailer Expansion
Wal-Mart’s Presence - Over 60 Stores across China
Dalian
Qingdao
Beijing
Tianjin
Shanghai
Shenyang
Xiamen
Shenzhen
ShantouDongguan
Chongqing
Kunming
FuzhouChangsha
Wuhan
Nanchang
Changchun
Harbin
Jinan
Nanjing
Nanning
Guiyang
Taiyuan
Source: Wal Mart Website
Jinan
Harbin
DalianTianjin
Shenyang
Nanjing
Nanning
Changsha
Wuhan
Beijing
Shanghai
Guangzhou
Macquarie Shopping Mall Portfolio
Signals of Change: Bank Expansion
Signals of Change: High Tech Expansion
The Investors’ Geography
Taiwan
Japan
Korea
MNCs
Xiamen
II
III
Dalian
Qingdao
Yangtze River Delta
Xiamen
China 30: City Evolution Curve
China 30: City Evolution Curve
Ningbo
Wuxi
Fuzhou
Jinan
Harbin
Changchun
Zhengzhou
Changsha
Maturing
Shanghai
BeijingZhuhai
Wenzhou
Lanzhou
Urumqi
Kunming
Hefei
Nanchang
Nanning
Changzhou
Growth Early Adopters
Watch ListDormant
Guangzhou
Shenzhen
ChengduHangzhouTianjinChongqingSuzhouWuhanNanjingDalianShenyangQingdaoXi’anXiamenDongguan
Short Term Winners
Medium Term Winners
Longer Term Winners
Property Opportunities
Dormant
Early Adopters
Growth
Property Opportunities
Maturing
Active Players in the Market
• Low-end Retails • Mass Residential
• Specialist Opportunities e.g. Tourism and Hotel sector
• Office • Luxury Retail • MICE• Logistics• Hi-end Residential
Various Investment opportunities for institutional investors
II
III
China’s Emerging Tier II Cities
Tianjin• 10 million inhabitants• Manufacturing/Freight Hub • Improving linkages with Beijing
Suzhou• IT Manufacturing Hub• High FDI• Proximity to Shanghai
Dalian• IT Hub• Emerging BPO Cluster• Japanese Investment
Hangzhou• IT Hub• Labour Skills• Proximity to Shanghai
Chengdu• Commercial Hub of SW China• Manufacturing Centre• Target for International Developers
DalianTianjin
Chengdu
Suzhou
Hangzhou
Tier II and |III cities: Drivers of Growth?
10 Drivers we identified….
Industrial Heritage Cities
Ripple Effect Cities
Port Cities
Gateway Cities
R&D Cities
Administration Targets
Hi-Tech Cities
Culture Cities
Neighbours Cities
Transportation Cities
Industrial Heritage CitiesShenyang & Changchun
Old Heavy Industrial Base - Changchun: Car Manufacturing - Shenyang: Chemicals & Machine Tools Rich JV opportunities for foreign
investors Improving Infrastructure
Hi-Tech CitiesDongguan & Wuhan
Dongguan: Significant FDI from Hong Kong and Taiwanese companies for computer components/Export driven economy
Wuhan: The “Detroit of China” / China’s largest laser equipment production base and the third largest optical fibre producer in the world
R&D CitiesNanjing & Xi’an
High Skilled Labour Force- Nanjing: number of engineers twice as high as
in Shanghai- Xi’an: ranks third in R&D capability after
Beijing and Shanghai
Promising Future in R&D Sector
- Nanjing has become a favourable location for auto design and development. Ford had big commitment in the city
- Xi’an aims to become another “Bangalore” by carving out a niche in IT outsoucing
Ripple Effect CitiesSuzhou, Hangzhou, Wuxi, Changzhou, Hefei & Jinan
Benefiting from Cost-based decentralization from Shanghai
Moving up value-chain- Suzhou developing hi-tech Industry- Wuxi focusing on solar-energy industry- Changzhou expanding to MICE activities- Hangzhou has active indigenous private sector
Hefei & Jinan benefiting from second-wave ripple effect over medium term
NeighboursDalian, Qingdao, Xiamen & Fuzhou
Geographic location offers opportunities for cooperating with nearby countries
- Dalian and Japan- Qingdao and Korea- Xiamen and Taiwan- Fuzhou and Taiwan
Administrative TargetsChengdu, Chongqing & Tianjin
Chengdu & Chongqing: Target of “Go West” policy
Preferable choice for those MNCs seeking to access the large domestic consumer markets in west China
Tianjin: Economic Centre in North China
Airbus set up its first assembly line outside Europe in Tianjin
Port CitiesNingbo
Ningbo Port will double in size by 2010 One of the top 5 ports in China
Completion of Hangzhou Bay Bridge (2008) links Ningbo directly to Shanghai
Wealthy local residents
Transportation HubsZhengzhou & Nanchang
Zhengzhou: Railway Hub of China/on the major north-south axis from Beijing and southern China
Nanchang: allowing Hong Kong and Macau investors to invest in public transportation industry
Gateway CitiesKunming, Harbin & Nanning
Kunming: International highway connecting Chengdu and Bangkok is planned
Nanning: Benefiting from a booming Vietnamese economy
Harbin: links with Russia, major trading hub in north-east China.
Culture CitiesChangsha
Creative hub for media and entertainment
Super Girl Show impact
Entertainment industry growing rapidly, accounting for 10% of GDP
The raised city image has attracted lots of well-known developers/investors.
China Context Economy Investment
China 30
China Logistics
China Retail
City Cobwebs
China: Emerging City Winners
China Logistics
• 20 Logistics Hotspots appearing on radar screen of logistics operators and developers
• 80% of activity in five prime hubs – Shanghai, Shenzhen, Guangzhou, Beijing and Tianjin
• Secondary Logistics Hubs – Suzhou, Ningbo, Qingdao, Dalian and Xiamen
China’s 20 Logistics Hotspots
Source: Jones Lang LaSalle Research
China’s 20 Logistics Hotspots
Bohai Bay 21%
Yangtze River Delta 43%
Pearl River Delta21%
Other 15%
Survey of 138 Logistics OperatorsSource: China Supply Chain Council, Jones Lang LaSalle, 2006
China Warehousing Facilities: Current Activity
Survey of 138 Logistics OperatorsSource: China Supply Chain Council, Jones Lang LaSalle, 2006
Storage
25%
Trans-Shipment
20%
Industry Operations 9%
Value-Added Services
20%
Reverse Logistics
7%
Consolidation
18%
Current Warehousing Uses
China Warehousing Uses
2 2.1 2.2 2.3 2.4 2.5 2.6 2.7
Survey of 138 Logistics OperatorsSource: China Supply Chain Council, Jones Lang LaSalle, 2006
Value-Added Logistics
Consolidation
Trans-Shipment
Industry Operations
Reverse Logistics
Storage Score
China Warehousing Uses – Growth Prospects
Source: Ministry of Communications of PRC, November 2006
China’s Future Expressway Network
Source: Ministry of Communications of PRC, November 2006
China’s Existing Rail Network
Mainland China’s Major Ports Network
0 500 1000 1500 2000 2500 3000 3500
NANJING Lukou
HANGZHOU Xiaoshan
XIAMEN Gaoqi
CHENGDU Shuangliu
SHENZHEN Baoan
GUANGZHOU Baiyun
BEIJING Capital International
SHANGHAI*
HONG KONG International
‘000s tons
•Combines Shanghai’s Pudong and Hongqiao airportsSource: Statistics Bureau of each City
China’s Top Freight Airports, 2005
Beijing 13%
Tianjin 5%
Shanghai 32%Suzhou 7%
Guangzhou 12%
Shenzhen 9%
Chengdu 6%
Xiamen 3%Greater Bohai Bay 21%
Yangtze River Delta 43%
Pearl River Delta21%
Other 15%
Survey of 138 Logistics OperatorsSource: China Supply Chain Council, Jones Lang LaSalle, 2006
Region City
Warehousing Facilities: Current Presence
Greater Bohai Bay 23%
Yangtze River Delta 27%
Pearl River Delta35%
Other 15%Beijing 13%
Tianjin 8%
Shanghai 23%
Suzhou 2%Guangzhou 19%
Shenzhen 15%
Chengdu 12%
Region City
Survey of 138 Logistics OperatorsSource: China Supply Chain Council, Jones Lang LaSalle, 2006
China Warehousing Facilities: Plans for Next 2 Years
0 10 20 30 40 50 60 70
Tianjin
Beijing
Guangzhou
Chengdu
Ningbo
Shanghai
Shenzhen
Source: Jones Lang LaSalle, 2006
US$/sq m/year
Warehousing Rental Ranges
China Context Economy Investment
China 30
China Logistics
China Retail
City Cobwebs
China: Emerging City Winners
China: Retail Futures
China’s Consumer Groups
The Lost Generation
The Emerging Middle Classes
The Girls of the Economic Miracle
The Little Emperors
The New Elite and Super Rich
The Vibrant Youth
World Largest Shopping Malls
ChinaSouth China Mall, DongguanGolden Resources Mall, BeijingPanda Mall, ChengduGrandview Mall, GuangzhouOriental Plaza, FoshanMall of China, QingdaoTriple 5 Mall, Wenzhou
North AmericaWest Edmonton Mall, AlbertaSouth Coast Plaza, Orange CountySawgrass Mills, Ft LauderdaleMall of America, MinnesotaDel Amo Fashion Center, LA
Source: New York Times
China Context Economy Investment
China 30
China Logistics
China Retail
City Cobwebs
China: Emerging City Winners
0
5
10
15Economic Size
Population
Population Growth
Economic Growth
Infrastructure
Openess
Innovation
Labour
Education
Residential Potential
Quality of life
Wealth
Beijing
City Cobweb: Beijing
0
5
10
15Economic Size
Population
Population Growth
Economic Growth
Infrastructure
Openess
Innovation
Labour
Education
Residential Potential
Quality of life
Wealth
Shanghai
City Cobweb: Shanghai
Guangzhou
0
5
10
15Economic Size
Population
Population Growth
Economic Growth
Infrastructure
Openess
Innovation
Labour
Education
Residential Potential
Quality of life
Wealth
City Cobweb: Guangzhou
Shenzhen
0
5
10
15Economic Size
Population
Population Growth
Economic Growth
Infrastructure
Openess
Innovation
Labour
Education
Residential Potential
Quality of life
Wealth
City Cobweb: Shenzhen
Chongqing
0
5
10
15Economic Size
Population
Population Growth
Economic Growth
Infrastructure
Openess
Innovation
Labour
Education
Residential Potential
Quality of life
Wealth
City Cobweb: Chongqing
Chengdu
0
5
10
15Economic Size
Population
Population Growth
Economic Growth
Infrastructure
Openess
Innovation
Labour
Education
Residential Potential
Quality of life
Wealth
City Cobweb: Chengdu
Tianjin
0
5
10
15Economic Size
Population
Population Growth
Economic Growth
Infrastructure
Openess
Innovation
Labour
Education
Residential Potential
Quality of life
Wealth
City Cobweb: Tianjin
Wuhan
0
5
10
15Economic Size
Population
Population Growth
Economic Growth
Infrastructure
Openess
Innovation
Labour
Education
Residential Potential
Quality of life
Wealth
City Cobweb: Wuhan
Xi'an
0
5
10
15Economic Size
Population
Population Growth
Economic Growth
Infrastructure
Openess
Innovation
Labour
Education
Residential Potential
Quality of life
Wealth
City Cobweb: Xi’an
Hangzhou
0
5
10
15Economic Size
Population
Population Growth
Economic Growth
Infrastructure
Openess
Innovation
Labour
Education
Residential Potential
Quality of life
Wealth
City Cobweb: Hangzhou
Suzhou
0
5
10
15Economic Size
Population
Population Growth
Economic Growth
Infrastructure
Openess
Innovation
Labour
Education
Residential Potential
Quality of life
Wealth
City Cobweb: Suzhou
Nanjing
0
5
10
15Economic Size
Population
Population Growth
Economic Growth
Infrastructure
Openess
Innovation
Labour
Education
Residential Potential
Quality of life
Wealth
City Cobweb: Nanjing
Dalian
0
5
10
15Economic Size
Population
Population Growth
Economic Growth
Infrastructure
Openess
Innovation
Labour
Education
Residential Potential
Quality of life
Wealth
City Cobweb: Dalian
Xiamen
0
5
10
15Economic Size
Population
Population Growth
Economic Growth
Infrastructure
Openess
Innovation
Labour
Education
Residential Potential
Quality of life
Wealth
City Cobweb: Xiamen