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Hong Kong and Beijing China's Most Expensive Industrial Locations

Beijing is the most expensive city on the Chinese mainland for businesses to occupy industrial space, according Industrial Space Across the World, a publication of Cushman and Wakefield, a global real estate consultancy firm.

The report indicates that Hong Kong has moved up one place to become the world’s 13th most expensive city for industrial occupancy, with industrial rents rising by 16 percent to US$10.17 per square metre per month, with demand sparked by booming trade flows to the Chinese mainland and a shortage of supply. Beijing ranked 39th in the worldwide survey at US$6.18 per square metre per month.

Industrial Space Across the World is a study of 85 of the world’s top industrial locations. The main global ranking is compiled by determining the most expensive locations in each of the 45 countries monitored.

“In 2006 in Hong Kong, we saw the Macquarie Goodman Hong Kong Wholesale Fund established and the continued growth of the Mapletree Logistics trust, highlighting institutional interest in the sector,” said Andy Cheung, associate director of Cushman & Wakefield’s Hong Kong Industrial Services. “Overall, Hong Kong’s industrial market in 2007 will continue to be strong with rising exports and increasing container traffic and strong domestic economic growth. However, there will be increasing pressure on yields.”

Rents in Shanghai and Beijing grew by 20 percent and 9 percent during the year. Beijing experienced a rapid rise in demand for logistics space, as multinational companies continued to locate facilities in the capital city. Letting activity was also stimulated by a further liberalisation of land usage rights.

Andy Zhang, general manager of Cushman & Wakefield’s Beijing office explained: “Beijing is currently the prime location for the high-tech industry on the Chinese mainland. However, we anticipate it will become increasingly popular with manufacturing and logistics industries in near future, due to its organic integration with Tianjin Municipality and the surrounding cities of Hebei Province. Tianjin, one of China’s largest industrial and logistics centres, is already regarded as China’s next growth engine after the Pearl River Delta and the Yangtze River Delta and will certainly drive the demand for industrial space in Beijing.”

In this year’s survey, 90 percent of the locations showed rising or stable occupancy costs for industrial space in 2006, with only 10 percent showing a decline. Globally, rents that form the main part of occupancy costs increased by an average of 6.5 percent in 2006 compared with 1.8 percent in 2005.

Elaine Rossall, Cushman & Wakefield’s head of Business Space Research and Consultancy in Europe, the Middle East and Africa, said: “Many of the world’s top industrial locations are continuing to benefit from the globalisation of manufacturing and from the internationalisation of the main logistics networks. Occupancy costs are also being driven up in many locations because of competing pressures from other, more high-value land uses, in particular from residential and retail.”

eijingers are turning to Yanjiao, Hebei Province, just across the Chaobai River from eastern Beijing Municipality in their search for an affordable home. Average home prices in Yanjiao, a suburban city with colleges, research institutes and tree-lined streets, are no more than 4,000 yuan (US$520) per square metre, and convenient transportation is available for commuting into Beijing, whether by car or public transportation.

omebuyers are turning to Yanjiao and other locations to escape high prices in Central Beijing, where the second-hand property market experienced a 15.6 percent increase in prices during the first quarter of 2007, according to analysis from 5I5J, a major real estate agency. Second-hand apartments sold per square metre at an average price of 7,034 yuan (US$914) during the first three months of the year, compared with the 6,083 yuan (US$791) during the same period in 2006.

bout 70 real estate projects will be opened in Beijing for sale in April, according to estimates made by major property agencies. Among them, 30 percent will be small units (less than 90 square metres) and more than 80 percent will be outside the Fourth Ring Road.

leven properties with a total area of 1.6 million square metres (sq.m.) were sold during the first quarter of 2007, according to the Beijing Municipal Land Reserve Centre. Among the 11 properties, five are designated for residential development with an area of 1.14 million sq.m., 15 times that of 2006.

fficial figures reveal that Beijing°Øs public housing fund was valued at 113.1 billion yuan (US$14.7 billion) at the end of 2006. Of that, 53.3 billion yuan (US$6.93 billion) has been withdrawn, leaving an account balance of 59.8 billion yuan (US$7.77 billion).