WORLD WINNING CITIES Global Foresight Series 2013

China’s City Winners City Profile 2 ’s City Winners

China’s City Winners: Tianjin Jones Lang LaSalle’s View One of the most puzzling aspects of the current cycle is the lack of quality office space. The construction of office buildings is currently When we published our first World Winning Cities profile in 2006, dominated by domestic developers who almost exclusively sell them Tianjin was a city with a strong but generic industrial base, a strata title. As a result, the leading office towers have maintained decent port and some tired real estate stock. Times have certainly occupancy rates in excess of 90% and MNCs have few options for changed, although international real estate investors have been slow expansion. to get the message. Tianjin’s New Area is another example of a little understood Since 2007, the economy has more than doubled in size and the and poorly marketed area that has not helped the city’s image. city is now home to what is arguably China’s largest aerospace Central to Tianjin’s economy, but located on its eastern edge, the manufacturing cluster. As the industrial base has continued to grow key industrial area has been widely panned for its attempt to create other sectors such as tourism have taken off. Multiple five-star the Yujiapu Financial . Some of the criticism is well deserved, hotels dot the riverside and Tianjin’s former Italian concession is but projects with 20 year timelines seldom look great only three now a popular pedestrian retail area. The rusting skeletons of half years into the development cycle. No one expects Tianjin’s Yujiapu completed office projects that used to dot the skyline have been to rival or Kong, but a city of 13 million should be replaced by iconic office towers and retail centres. able to successfully create a district with a core financial component, We understand why the city has its sceptics. When a city of 13 provided the government first invests in the infrastructure, seeds it million doubles the size of its modern residential and commercial with SOEs and layers on financial incentives. stock all within just a few short years - it looks like a bubble from Tianjin sceptics will continue to abound, but just as the leaders of almost every angle. However we have observed that when a city Tianjin have finally worked out how to leverage their industrial and of this size retools, the overcapacity created short term can be population base, some investors are positioning themselves to take absorbed in mammoth cycles of take up that follow. advantage of one of China’s fastest growing economies.

HEILONGJIANG

JILIN

XINJIANG INNER MONGOLIA Tianjin Dalian Jinan NINGXIA HEBEI SHANXI Qingdao QINGHAI SHANDONG GANSU Zhengzhou Xi’an JIANGSU SHAANXI HENAN TIBET Hefei Shanghai HUBEI ANHUI Chengdu Wuhan Ningbo Chongqing ZHEJIANG SICHUAN Changsha JIANGXI HUNAN GUIZHOU FUJIAN Taipei Tier 1 Core Kunming GUANGXI Xiamen GUANGDONG YUNNAN TAIWAN Tier 1.5 Transitional Guangzhou Dongguan Nanning Tier 2 Growth Shenzhen Tier 3 Emerging Hong Kong Macau HAINAN Tianjin City Profile 2013 3

Tianjin in Numbers

Economic Dashboard Size Tianjin Beijing Chengdu Shenyang Chongqing Area (sq km) 11,920 16,411 12,120 13,000 82,403 Permanent Population 13.5 20.7 14.1 8.1 28.9 (million) Registered Population 74 64 81 89 114* (%) GDP 1,288 1,780 814 670 1,146 (RMB billion) Growth GDP 13.8 7.7 13.0 11.0 13.6 (% y-o-y) Permanent Population 2.5 3.1 -0.1 -0.6 7.3 (% pa 2005- 2011) Infrastructure Air Passengers 8.1 81.9 31.6 11.0 22.1 (millions) Openness FDI 13.1 6.4 4.9 5.1 6.3 (USD billion) Note: Values are for 2012 * Chongqing has a significant number of registered citizens working outside of the city, which results in this high number. Source: National Bureau of Statistics of China

Tianjin’s Competitive Position Vital Statistics 1 1st in China for GDP growth rate (2010, 2011 and 2012) 1 1st in China for dynamic growth potential (2012) 4 4th in China for government transparency (2012) 4 4th in China for attractiveness of property development (2012) 4 4th in the world for GDP growth rate to 2025 (2011) 5 5th in China for development potential (2011) 12 12th in the world for total GDP by 2025 (2011) Source: China Institute of City Competiveness; Chinese Academy of Social Sciences; Jones Lang LaSalle 4 China’s City Winners

City Overview expansion in recent years. According to the municipal government’s 12th Five-Year Plan, Tianjin aims to boost advanced manufacturing One of the world’s fastest growing cities industry and to also accelerate the development of a modern Tianjin is located in China’s north-eastern Bohai Bay area, about services sector, the latter of which is projected to contribute to half of 140 km south-east of Beijing. It is one of the four municipalities of the city’s total GDP by 2015. the People’s Republic of China along with Beijing, Shanghai and Tianjin’s expanding urban area Chongqing. In recent years, Tianjin has experienced extraordinary With a total area of 11,920 sq km, Tianjin comprises 12 districts, economic development at a rate faster than the national average, three counties and the Tianjin Binhai New Area (TBNA), which earning the accolade as one of the world’s fastest growing large constitutes a sub-provincial city. In terms of economic and real cities. Its growth has been underpinned by massive infrastructure estate development, the city’s key geographic areas are as follows: investment, high levels of foreign direct investment and strong policy support from central government as one of the country’s key national • Central Tianjin (comprising of Heping, Hexi, Nankai, Hedong, growth poles. According to Jones Lang LaSalle’s China50 research Hebei and Hongqiao Districts) is the city’s main business area. report, Tianjin has the highest level of economic development It is where most multinational services firms and retailers, outside of China’s Tier 1 Cities. as well as its main commercial property developments, are concentrated. With a coastline that stretches approximately 153 km, Tianjin has the biggest port in Northern China, which has and continues to fuel the • TBNA, with an area of 2,270 sq km, is (after Central Tianjin) the expansion of the city’s trade, shipping and logistics sectors. The city city’s second strongest area for real estate and manufacturing is also the largest industrial centre in the region, with manufacturing activity. It’s a key economic engine for the city, consistently the main contributor to the local economy. Tertiary industries, such reporting economic growth in excess of 20% per year since as finance and business services, have also experienced rapid 2006. Within the TBNA, areas that are witnessing major development include: City Evolution: Economy Score Improvements, 2009 - 2012 Tianjin • Tianjin Economic-Technological Development Area Suzhou Tianjin (TEDA). One of the first state-level development areas Wuhan Suzhou approved by the State Council of the PRC, TEDA has Chongqing Wuhan established itself as the most important manufacturing Hangzhou Chongqing Hangzhou base in Tianjin, and is now dominated by international Nanjing Nanjing manufacturing giants such as Samsung, Motorola and Chengdu Chengdu FAW-Toyota. Currently, all of the Grade A office space in Dalian Dalian the TBNA is located within the TEDA Modern Service District Shenyang Shenyang Dongguan Dongguan (TEDA MSD), the first phase of which was completed in Changsha Changsha 2011. Several reputable local and domestic developers have Wuxi Wuxi launched high-end residential projects in the area, including Qingdao Qingdao Vantone Central Park, Vantone Mansion and Warner Jinan Jinan Garden. Ningbo Ningbo Xi’an Xi’an • Yujiapu Financial District. Covering a land area of some Foshan Foshan Hefei 3.86 million sq m, the district has 120 planned plots which Hefei Zhengzhou will equate to a total construction mass of around 9.5 million Zhengzhou Changzhou sq m, of which over 50% has been allocated for office Changzhou Low High space. Positioning itself as the financial innovation centre Low High 2009 2012 for Northern China, this large-scale project commenced its 2009 2012 Source: China50, Jones Lang LaSalle four-phase construction in 2009; no exact date has been set for its completion. Tianjin City Profile 2013 5

• Sino-Singapore Tianjin Eco-City (SSTEC). A joint venture Area between a consortium of Singapore and Chinese companies, SSTEC is a planned 30 sq km sustainable residential ‘model city’ designed to create a liveable and eco-friendly TBNA community for 350,000 residents by 2020. Thus far, the Central Tianjin overall scheme has attracted recognised developers from across the globe, including Mitsui Fudosan Residential Co., Other Districts Ltd. (Japan), Sunway City Berhad (Malaysia), Samsung C&T Corporation (Korea) and Ayala Land, Inc. (Philippines). SSTEC will be providing the infrastructure and amenities, which will include education and medical facilities, as well as retail areas. Greater Tianjin 2011 GDP

JIXIAN COUNTY

BEICHEN

LI C HONGQIAO HEBEI

BAODI HEDONG DISTRICT HEPING NANKAI WUQING HEXI DISTRICT NINGHE COUNTY

BEICHEN DISTRI DONGLI 2011 Population DISTRICT

XIQING Central Tianjin DISTRICT JINGHAI BINHA JINNAN Greater Tianjin COUNTY NEW ARE DISTRICT Haihe River High Speed Railway Line JINGHAI Tianjin Inner Ring Road COUNTY BINHAI Tianjin Outer Ring Road NEW AREA

Area 2011 GDP 2011 (sq km) (RMB billion) Population Source: Tianjin Municipal Statistics Bureau (million) TBNA 2,270 620.7 2.5 Central Tianjin 173 231.7 4.5 Other Districts and 9,460 278.3 6.5 Counties Source: Tianjin Municipal Statistics Bureau 6 China’s City Winners

Demographics and Employment The surge in people numbers is reflected in the escalation in the size of Tianjin’s labour force which had reached over 7 million by 2011, Tianjin’s total permanent population stood at 13 million by end 2011, an increase of 41% since 2005. The workforce employed in the up 30% since 2005 - an addition of an average 0.6 million new tertiary sector has experienced even greater growth, rising by over residents per year over the period. When compared to 2001-2005 60% since 2005. and its 4% expansion, the population growth rate has rocketed. According to the Sixth Population Census, Tianjin is one of the fastest growing cities in terms of permanent population, and is ranked fifth for its growth rate among Greater China’s cities.

Tianjin’s Employment Structure Tianjin’s Districts and Counties (2011) District Permanent GDP 4.0 60% Population RMB billion 3.5 39% ‘000s 3.0 Central Tianjin Heping District 303.1 57.747 Hedong District 889.8 25.406 2.5 Hexi District 901.0 58.513 2.0 105.54 48.001

Million 805.3 29.198 1.5 546.9 12.868 1.0 TBNA 2536.6 620.687 Suburban 635.4 60.281 0.5 741.3 59.550 0.0 Jinnan District 629.8 37.997 Primary Secondary Tertiary 704.3 56.299 2005 2011 Wuqing District 1005.1 45.551 Source: Tianjin Municipal Statistics Bureau 831.2 32.333 Others Ninghe County 431.0 22.495 Jinghai County 674.3 34.366 Jixian County 855.3 25.011 Source: Tianjin Municipal Statistics Bureau

Sector Trends

Industry Primary Secondary Tertiary Trend Decreasing significantly Increases slowing down Increasing sharply Factors • Mechanisation of farms reduces the need • Tianjin has developed into North China’s • As Tianjin matures, services like health, for farm workers. Rural workers migrate to largest industrial centre. The secondary education and tourism are becoming urban area sector is currently the major contributor more crucial; workforce demand in these to Tianjin’s economy providing many sectors grows rapidly • Workers prefer better paid and less employment opportunities physically demanding jobs in the • More and more foreign banks and secondary or tertiary sectors • The progress of science and technology professional services firms enter Tianjin greatly improve labour productivity and to open branches, adding employment promote the optimisation and upgrade of opportunities Tianjin’s industrial structure. • Producer services for the manufacturing industry also enjoy rapid development and create many employment opportunities, e.g. scientific research and technical services Tianjin City Profile 2013 7

Economic Background Tianjin’s GDP Growth 2005-2012 Double-digit growth since 2004 1,400 25% Tianjin’s economy has maintained double-digit growth since 2004, 1,200 20% with average GDP growth above 15%, significantly higher than 1,000 15% the national average. According to data released by the Tianjin 800 Municipal Statistics Bureau, the city’s GDP reached RMB 1,289 600 10% billion in 2012, an increase of 13.8% on 2011. Although this is a RMB billion 400 slowdown on the 16.4% achieved in 2011, the growth rate is still 5% nearly double the national average and the highest in the country. 200 By the end of 2012 per capita GDP in Tianjin stood at more than 0 0% 2005 2006 2007 2008 2009 2010 2011 2012 US$14,800. GDP Growth Rate The city’s economic boom is expected to maintain its strong upwards Source: Tianjin Municipal Statistics Bureau trajectory, driven by infrastructure spending in the short term and the development of the TBNA over the longer term. The success of the GDP Growth Rates Compared, 2012 TBNA, as one of city’s main economic development zones, can be 15% measured by its generation of 55.9% of the city’s GDP in 2012 and the 20% + year-on-year GDP growth, and also, comparatively, by 12% the fact that its growth rate has surpassed Shanghai’s Pudong New Area. 9%

6% Secondary industries continue to dominate

Tianjin is Northern China’s largest industrial centre with pillar 3% industries in automobile, micro-electronics and biomedicine. The tertiary sector experienced rapid growth of 12.4% in 2012 and 0% Xi’an accounted for 47% of the city’s total GDP, yet despite these strong Tianjin Beijing Chengdu Qingdao Shanghai Chongqing Shenyang Shenzhen figures, the secondary industry remains the main driver of the Guangzhou Source: Tianjin Municipal Statistics Bureau city’s economy, reflected in its proportion of secondary industries, which is larger than the average for China’s coastal provinces and municipalities. Tianjin’s GDP by Industry, 2005-2012

100% Attracting domestic and foreign retailers 42.5% 42.6% 42.8% 43.0% 45.3% 45.3% 46.2% 47.0% Tianjin’s total retail sales of consumer goods grew by 15.6% in 2012 80% to reach RMB 392.1 billion, which puts it at the forefront of rankings for retail growth among China’s principal cities. With Tianjin’s more 60% attractive city offer and rising shopper affluence, it has rapidly taken 54.7% 55.1% 55.1% 55.2% 53.0% 53.1% 52.4% 51.7% 40% on greater market significance, and this has been reflected in the arrival of a large number of major retailers in recent years, such as 20%

IKEA, COFCO Joy City, Lotte Department Store and Walmart. 2.9% 2.3% 2.1% 1.8% 1.7% 1.6% 1.4% 1.3% 0% 2005 2006 2007 2008 2009 2010 2011 2012 Primary Secondary Tertiary Source: Tianjin Municipal Statistics Bureau 8 China’s City Winners

Urban Planning and Infrastructure Now in its 12th Five-Year Plan, Tianjin is shifting from ‘growth and quantity’ to ‘development and quality’, and a key element within its Focusing on development and quality plans is the improvement of the city’s living environment through the In its overall urban planning for the period 2005-2020, the Tianjin establishment of three particular zones whose primary objective is Municipal Government laid out a sizeable list of tasks to be ecological and environmental protection. These zones, dispersed accomplished. One of the most important was to develop two new from the north to the south of the city, take advantage of the Jixian secondary commercial zones to the north-west and south-east of mountain regions and the area’s existing wetlands, and are looking Central Tianjin, namely Wuqing New Town and Tianjin Binhai New to attract real estate development interests, particularly residential. Area (TBNA). Situated between Beijing, Central Tianjin and Bohai Bay, these commercial zones were planned so as to leverage Airport expansion existing economic activities in the two major cities, all interconnected Tianjin Binhai International Airport is located in the Dongli District, 13 through a series of Bejing-Tianjin-Tanggu expressways. km from the city centre, and in 2012 it had a passenger throughput of 8.1 million, an increase of 7.3% on 2011. Terminal One, City Spatial Structure which opened in April 2008, has an annual capacity of 10 million passengers; having received formal approval from the National Development and Reform Commission in 2010, phase two of the airport’s development is underway with the completion of a 220,000 sq m second terminal anticipated for 2014. This is expected to

Jixian County double the passenger capacity of the airport, which will both meet the aggressive growth in demand and turn the city into the most important air cargo transportation and distribution hub in North-East Asia. Baodi District Tianjin West Station redevelopment Located in Hongqiao District, the new Tianjin West Railway Station, Wuqing District which opened in June 2011, has become one of the largest integrated transportation hubs in China combining the Beijing- Shanghai (Jinghu) high-speed railway with the and local Mass Transit systems. Ninghe County/Hangu City Center The station’s influence on the vicinity has begun to take effect, with land values reported to have risen by more than 200% over three

TBNA Core Area years. The municipal government is planning for the area to become a secondary commercial submarket to include office, retail and serviced apartment developments, and major developers such as Jinghai County Three Axes TEDA Group, Vantone Real Estate and the Lujiazui Development Dagang Group from Shanghai are already active in the area. Two Belts

Six Plates High-speed rail connections As of 2012, there are two main high-speed railway lines running through Tianjin, connecting to Beijing, Shanghai and other major East: To develop the port and the city towards the sea Chinese cities. The increased connectivity between Tianjin and South: To move the chemical industry to Dagang in the south other urban centres is a critical component to the ongoing economic West: To integrate each functional zone along Jinbin Corridor development of the city’s economy. North: To improve the ecological environment of Hanggu in the north Middle: To promote the comprehensive service functions of the core Tianjin City Profile 2013 9

Beijing - Tianjin Rail and Highway Infrastructure

Beijing-Tianjin Expressway Beijing-Tianjin-Tanggu Expressway Beijing-Tianjin Inter-city Rail Beijing Beijing-Shanghai High-speed Rail Beijing-Shanghai Expressway Haihe River Inner Ring Road Outer Ring Road Tianjin Avenue

Tianjin

Beijing-Tianjin high-speed railway system, and thereby improving connectivity between north-east, The 115 km high-speed railway line was completed in August north and south China. 2008, and has reduced travel time between Tianjin and Beijing to just 33 minutes. Following the route of the Beijing-Tianjin-Tanggu Expressway connectivity Expressway, the line has greatly enhanced the city’s connectivity, Seventeen expressways have been established in Tianjin, and encouraging the development of tourism and other tertiary the key roads within its regional network currently include: Tianjin- industries, and improving business cooperation and communications Beijing-Tanggu Expressway; Tianjin-Jixian Expressway; Tianjin- between the two cities. Baoding Expressway; Rongwu Expressway; Central Avenue running through Hangu, Tanggu and Dagang; and Tianjin Avenue Beijing-Shanghai (Jinghu) high-speed railway connecting Central Tianjin and Binhai New Area. In June 2011, Tianjin was joined to the Jinghu high-speed railway North China’s largest port line, connecting it with Beijing and Shanghai, as well as the Tianjin Port: Approximately 170 km from Beijing and 60 km from provinces of Hebei, Shandong, Anhui and Jiangsu. Currently, there Central Tianjin, Tianjin Port is one the country’s most important are 14 high-speed trains to Shanghai Hongqiao station daily with a commercial ports due to its strategic location on Bohai Bay. As one travel time to Shanghai of about five hours; five of the trains start of the main shipping hubs on the Chinese coast, it provides links from Tianjin West Station. to more than 400 ports in over 180 countries, and in 2012 handled 476 million tons of cargo and 12.3 million TEU of containers, Tianjin-Qinhuangdao (Jinqin) high-speed railway making it the world’s fourth largest port by throughput. Its capacity is The Jinqin high-speed railway, which is expected to be completed in increasing at a rapid rate, and by 2017 the port is expected to handle August 2013, will run across the Bohai Sea region and be a key line, 600 million tons. linking other parts of China’s railway network with the high-speed 10 China’s City Winners

Dongjiang Port: An extension of Tianjin Port, Dongjiang Port has The development of the Metro been built on reclaimed land and is part of the plan to develop In 2008, the municipal government established a 10-year blueprint to the Tianjin Binhai New Area (TBNA) into a shipping and logistics build a metro network comprised of more than 10 lines to serve both centre for Northern China. The peninsula has a total area of Central Tianjin and the TBNA. Increasing road congestion and the around 30 sq km and has zones designated for dock operations, consequent net economic cost, as well as the human toll through a logistics processing and auxiliary services, the latter of which will high road-traffic accident rate, have all contributed to the promotion accommodate the development of commercial, residential, tourist of metro lines as the optimum passenger transport solution to also and leisure facilities. meet the city’s escalating population growth and the expansion of its working and living areas. Key projects in Dongjiang Port The Tianjin metro network incorporates a mixture of ‘hub-and-spoke’ Tianjin International • South of the service zone, serving cruise lines and linear networks that connect Tianjin’s developing and existing Cruise Home Port from Japan and Korea • Includes offices, hotels, serviced apartments, an commercial areas. Subway Lines 2, 3 and 9 converge at Tianjin exhibition centre and shops Station, which is the main transportation hub for the city, while Lines Ocean One • Southeast of the service zone 6, 7 are the outer linear lines that circle around the hub. However, • Includes a hotel, residential, marina club, shops, even with an adopted blueprint, completion of these metro lines and a pedestrianised street along the water has been slow, stalled by relocation and construction issues. The Tianjin Metro Map (Central Tianjin)

Line No. 5 Line No. 4 Line No. 8

Line No. 1

Line No. 2

Line No. 9 Line No. 3

Line No. 7

Line No. 6 Tianjin City Profile 2013 11

Tianjin’s Metro System 2013

Xiaodian Fengchan River

Jinwei Road 1 Liuyuan Puyu Park Xihengdi Guojiuchang Yixingfu

Zhangxingzhuang Benxilu Qinjiandao

Tiedon glu Honghuli North Station West Train Station Zhongshanlu Yan’anxilu Xibeijiao Xinan - Jinshi Tianjin Shunchi Cuifuxin- Tianjin Airport 9 Caozhuang Xianyanglu jiao Gulou Bridge Station Bridge cun Dengzhoulu Economic Zone 2 Donghailu

Dong- TianjinBinhai Jieyuanxidao Hong- Guang- - Erweilu nanjiao Jianguodao Xinkailu Jingjianglu Helanlu Guoshanlu qilu kaisimalu International Airport Jinwan Plaza Shiyiji Huizhan Dawang- -nglu Dongli zhongxin Hepinglu zhuang Haiguangsi Economic Binhai Xiaobailou Dong Yihao Development Junliangch- Anshan- 海河（HaiheZhigu River）xinglu Zhangguizhuang Zone Hujiayuan Tanggu College dao Bridge eng Ying- koudao Zhon Erhao Xinli Xiaodong- Gangguangongsi Chezhan- TEDA Citizen Plaza Zhoudeng Xikanglu gshan Bridge zhuang beilu Memorial Hall Xiawafang Wujiayao men

Wangdingdi Hongqinanlu Tianta Nanlou 海河（Haihe River） 海河（Haihe River） Tucheng Hi-Tech Zone Huayuan Gangguangongsi Chentangzhuang Tianjin 3 University TBNA University City of Finance & 40km Huashanli Economics Tianjin City Centre Shuanglin

updated and extended was already operating prior to the • Line 1 runs from north-west Tianjin to the east via the city centre, 2008 blueprint but by 2012, only an additional three metro lines and serves Beichen, Hongqiao, Nankai, Heping, Hexi, and - 2, 3 and the extended 9 - had begun successful operation. Jinnan Districts. Line 1 enables Tianjin residents to travel to the city’s main commercial areas, such as Nanjing Road and Over the last few years, the areas around Line 1 stations have Xiaobailou. become integrated commercial zones, hosting a number of business, administrative and retail operations. Within these zones, • travels from east to west through Central Tianjin, and Nanjing Road and Xiaobailou are among the major office and retail crosses the Old Town Area, a key residential and commercial submarkets that have achieved the highest rents and capital values. area.

Along the other newly-operating lines, the associated commercial • connects Xiqing District in the south and Hebei District in zones are expected to witness a similar growth in real estate the north, and runs through key new residential and commercial activity, and looking further ahead, the continued development of areas. Tianjin’s metro network will help to accelerate economic activity in • , with a starting point at Tianjin Station, is the primary metro several districts and reduce the differences in population distribution line connecting Central Tianjin to TBNA in a reduced travel time between developed and less developed districts. of only 45 minutes.

Current Metro lines Since October 2012, the connection of metro lines 2, 3, and 9, has By early 2013, four metro lines were in operation linking the current resulted in Tianjin Station becoming the primary hub for all public major commercial areas in Central Tianjin: transportation in the city, providing, in addition, the onward link to Beijing through the high-speed rail line. 12 China’s City Winners

Core Activities

Huge strides in economic development aviation, petrochemical, heavy machinery, electronic information, Tianjin has made huge strides in its economic development, with biomedical, new energy and defence technology. Early evidence double-digit growth on GDP, retail sales and FDI over the past that the plan is bearing fruit is shown by a near 15% increase in five years. According to the municipal government’s 12th Five- Tianjin’s industrial production in 2012. Much of the output growth has Year Plan, the main agenda for 2011 to 2015 includes continued come from new projects coming on line; for instance, the launch of economic growth; the transformation of the city’s economic structure; a new mobile phone facility for Samsung, and the expansions of the an improvement in Tianjin’s ecological, social and cultural living Great Wall Motor Company and the helicopter division of the China environment; and a particular emphasis on the development of the Aviation Industry Company. Tianjin Binhai New Area (TBNA). For the tertiary sector, the goal is for it to increase its contribution Sustained economic growth to 50% of the city’s total GDP by 2015. One of the main tactics is According to the Five-Year Plan, released by mayor Huang Xingguo to develop additional services specific to manufacturing industries; in January 2012, the government has set an annual GDP growth for instance, professional services in the form of computer and rate of 12% for the five years, 2011-2015. The city is already data processing, accounting/auditing, consulting, advertising and outperforming this projection with rates of 16.4% in 2011 and 13.8% engineering companies. This has resulted in companies such as in 2012, and although it may cool to a slower rate, double digit of Taiwan, Halliburton and Cameron Pace Group (a growth is expected to be maintained through to 2015. leader in 3-D technology and production services) already setting up offices in Tianjin. Transformation of the economic structure The government plans to expand and strengthen both the secondary Development of TBNA and the tertiary sectors. For the secondary sector, the focus will be In 2006, the State Council of the PRC selected the TBNA as one of placed on higher-value-added manufacturing industries such as the first regions in China to pilot a financial reform programme, and Tianjin City Profile 2013 13

encouraged the local governing body to promote major pilot reforms of strong fundamentals and the potential derived from the city’s of financial enterprises, businesses and markets within the economic traditional industrial focus on equipment manufacturing, automobiles, development zone. Advantageous tax incentives and innovative electronic information and petrochemicals. financial structures were tested in the TBNA by companies Since our last report in 2006, Tianjin has also established additional registered in the area, the main goal being to encourage private industrial clusters in aerospace and new energy, and moreover, by equity investment through various government-backed industry end 2012, some 150 of Fortune Global 500 companies had set up investment funds. subsidiaries or manufacturing bases in the city. At the end of 2007, the largest domestic government-guided venture investment fund, the Binhai New Area Venture Capital Tianjin – Foreign Direct Investment, 2005-2012 Steering Fund, was launched. The RMB 2 billion fund was designed to act as a ‘parent fund’ to attract domestic and foreign venture 20 50% capital organisations to the TBNA, while part of it was used to help 15.0 40% 15 push ahead with the construction of 12 scientific research and 13.1 10.8 30% development centres for Tianjin’s pharmaceutical, biological, aviation 10 9.0 7.4 15.0% 20% technology and other industries. USD billion 5.3 5 4.1 3.3 10% One of the key steps in this development was the creation of the Tianjin Innovative Finance Investment Co., Ltd. TIFI, as it is also 0 0% 2005 2006 2007 2008 2009 2010 2011 2012 known, was incorporated with a capital of RMB 2 billion and is the Foreign Direct Investment Growth operator of the overall planning, construction and management of Source: Tianjin Municipal Statistic Bureau Yujiapu Financial District (YFD), and currently manages over RMB 20 billion of assets. TIFI’s role is to provide construction and financial solutions and to also help secure favourable policies for YFD’s investors and developers, by taking advantage of its privileged access to funding from central government and commercial lenders.

Business Environment High levels of FDI The Tianjin municipality has impressed investors with its growth potential and, accordingly, FDI has increased steadily in recent years at a pace above 10% per annum (2005 to 2012), one of the fastest growth rates among China’s cities. Total FDI reached US$13 billion in 2011 which equated to an impressive 20% year-on-year growth rate. A large portion of this investment has come off the back 14 China’s City Winners

Key Industries/Sectors Real estate sector: Investment in fixed assets in urban areas Real Estate 2007 2008 2009 2010 2011 Pillar industries continue to dominate Value 505.3 653.7 735.2 866.6 1,080.0 Tianjin has followed a high-investment and high-output growth model (RMB 100 millions) over the past few years, as it strives to develop into Northern China’s y-o-y increase 25.6% 29.4% 12.5% 17.9% 24.6% largest industrial centre. The pillar industries in the city’s economy National Ranking 2nd 2nd 2nd 2nd 2nd include equipment manufacturing, petrochemicals, electronic information, and light manufacturing and textile industry, which Total fixed asset investment 2,227.7 3,189.5 4,700.3 6,114.3 7,057.2 together account for 90% of gross output; equipment manufacturing (RMB millions) alone contributes 41%. Evidence of the strength of Tianjin’s key industries is clear through the established presence of names such 8,000 as Airbus, Bohai Drilling, Bohai Equipment and Vestas; and also in 7,000 newcomers like John Deere, Joy Mining Machinery and the blade 6,000 project of Dongfang Electric (Tianjin) Wind Power Technology. 5,000 4,000 RMB million 3,000 2,000 Pillar industries in Tianjin 2011 1,000 Gross Output Value of Industry 0 Sector % (Billions RMB) 2007 2008 2009 2010 2011 Investment in Real Estate Total 2,109 100 Total Fixed Asset Investment Equipment 873 41 Manufacturing Source: Tianjin Municipal Statistics Bureau Petrochemical 394 19

Electronic Information 329 15 Continued vigour in Tianjin’s real estate markets comes at the Light Manufacturing and same time as administrative measures are being enforced to cool 310 15 Textile investment in this sector, and based on factors such as investment New Energy and New Source: Tianjin Municipal Statistic Bureau, 2012102 5 volumes, development activity and retailer concentrations, Tianjin’s Material real estate market still ranks below other Tier 1.5 cities such as Biomedical 76 4 Chengdu, Shenyang, and Chongqing. However, the arrival of several Aerospace 25 1 new department stores and shopping centres are transforming the city’s prime retail districts into more diverse and attractive shopping Rapid real estate development destinations. Thus, given the level of central government support for Real estate development in Tianjin continues to be one of the the municipality, and the fact that the development of its property largest and fastest-growing fixed-asset investment categories, with market still lags behind many other Tier 1.5 cities, Tianjin’s real investment remaining exceptionally and consistently strong through estate sector should have more than enough potential to continue its the recent stimulus cycle. growth over the coming years. Tianjin City Profile 2013 15

Education a greater emphasis on vocational universities and professional institutions will be central to advancing this objective. A major academic hub Tianjin is one of China’s major academic hubs; according to the 2012 Tianjin Statistical Yearbook, the city is home to 55 higher Number of Universities education institutions and has a total enrolment of nearly 450,000 students. Comprising a mixture of general universities and several Beijing specialising in science and engineering, Tianjin’s higher education Guangzhou Wuhan system is comprehensive and covers every major discipline, and its Xi'an highest profile colleges include , , Shanghai Tianjin Medical University and Tianjin University of Finance and Nanjing Economics. Furthermore, the city also has 139 scientific research Tianjin Chongqing and technological development institutes, which engage over 13,000 Changsha professionals. The National Sixth Population Census reported that Chengdu 17.5% of Tianjin’s population had received a higher education. Zhengzhou Shenyang The city’s latest Five-Year Plan for education is primarily concerned Jinan with the deepening of research and development skills, and besides 0 20 40 60 80 100 comprehensively strengthening the quality of higher education, Source: Ministry of Education, 2012

Tianjin Haihe Education Park: positioned as a state-level exhibition of vocational education reform and innovation, the park covers an area of 37 sq km located on the south bank of the Haihe River between downtown Tianjin and Binhai New Area, and consists of three parts: Higher Vocational Colleges Park, Higher Education Park and High and New Technology Research Park. Construction commenced in 2009 and seven vocational colleges have now been completed, with more planned, including new campuses from the two most renowned universities in the city – Nankai University and Tianjin University.

Tianjin Higher Education Indicators (2011) Higher Education Institutions 55 Graduates 108,723 Enrolment 449,702

Source: Tianjin Statistical Yearbook 16 China’sChina’s CityCity WinnersWinners

Major Employers

Tianjin FAW Toyota Motor Co.,Ltd United Technology Corporation - Otis

Established in 2000, TFTM is located in Tianjin Economic and Otis, a United Technologies Corporate (UTC) subsidiary and the Development Area (TEDA) with a total area of 1.55 million sq m. It is world's leading manufacturer, installer and maintainer of elevators, a joint venture company funded by China FAW Group, Tianjin FAW escalators and moving walkways set up its first joint venture company XIALI Automobile Co., Ltd, Toyota Motor Corp and Toyota Motor in 1984. In 2007, a 140,000-sq m Otis TEDA Manufacturing Base (China) Investment Co., Ltd. In 2011, TFTM completed production of was constructed in TEDA. As the Asia-Pacific manufacturing centre 500,000 vehicles with a revenue of RMB 67.1 billion. of elevator and components, product R&D centre and industry chain building centre, the current Otis TEDA Base has become the most TEDA Investment Holding advanced elevator manufacturing base and the first global Green- TEDA Investment Holding was founded in 1984, along the power pilot factory. establishment of Tianjin Economic Development Area. As one of Tinghsin the largest SOEs in Tianjin, TEDA Holding is a forerunner in various business fields, including level one area development and real estate, Tinghsin International Group is a Taiwan funded enterprise which public facilities, manufacturing, finance and services. In 2011, its sales expanded aggressively in mainland China. It was founded in Tianjin revenue was RMB 58.3 billion and its total assets were valued at RMB TEDA in 1991 with total investment in Tianjin reaching above RMB 180.7 billion. 5 billion. Tinghsin Group has many sub-brands including Tingyi, HY Mall, Dicos and Family Mart. They attained revenue of RMB 6.8 billion Samsung in 2010. Now, the group has 14 factories, four shopping malls and 50 Located in Tianjin Xiqing District Microelectronics Industrial Park, restaurants in Tianjin with a 5,550 strong work force. Tianjin Samsung Communication Technology was established in 2001. COSCO It was jointly founded by Samsung Electronics and Tianjin Electronic Instrument Corporation and its core businesses focusing on the China COSCO Holdings Company Limited was established in Tianjin manufacture and sale of GSM smart phones. The company is a major Port Free Trade Zone in 2005, and is listed on the stock exchange engine of economic activity and annually is now producing more than in HKSE and SSE. It is the listed flagship and integrating platform for RMB 200 billion in revenue and indirectly generates approximately COSCO Group, the second largest integrated shipping company in 150,000 jobs. the world. The company is located 16 km away from the Tianjin Port and has a campus of 200,000 sq m. Its core businesses are shipping, Airbus logistics, terminal and related business and container leasing business. Tianjin Airbus assembly line is the first outside of Europe. Located Bohai Bank in the Tianjin Free Trade Zone, the assembly line, with a planned production capacity to assemble 300 A320 planes by 2015, officially Established in 2005 and located in Hexi District, Bohai Bank has made opened in 2008. In 2009, Airbus also signed a Memorandum of a significant mark in the finance sector. Their achievements include Understanding with Tianjin Free Trade Zone to establish a logistics being the first national joint-stock commercial bank approved by the centre that will optimise its supply chain management for all of Airbus’ State Council, the first Chinese commercial bank that brought in a vendors and clients in China. Airbus currently employs more than 400 foreign strategic investor at the initiation and establishment phase, and employees in Tianjin, of which more than 95% are local. also the first national joint-stock commercial bank headquartered in Tianjin. Bohai Bank’s total assets are estimated to be approximately RMB 300 billion. Tianjin City Profile 2013 17

Recent Major Investments Financial Street acquires land in Tianjin Financial Street (Tianjin), a subsidiary of Beijing Financial Street Third Hotel Indigo in China opened in Tianjin Holdings Co., Ltd., has acquired a mixed-use plot located on the InterContinental Hotels Group introduced its Hotel Indigo brand to south side of Changjiang Road in Tianjin’s Nankai district. The the Xiaobailou Commercial Business District in September 2012. purchase price of RMB 2.36 billion for the 79,600 sq m site was The boutique hotel, occupying some 30,000 sq m, is located in the the second highest achieved in Tianjin in 2011. The site has a Old German Concession and is the international operator’s third planned above-ground GFA of 295,000 sq m and will include Hotel Indigo in China. residential, retail, office and hotel space.

IKEA’s Tianjin store Unilever to build production base in Tianjin IKEA, the Swedish home-furnishings group, has opened its Tianjin Unilever plc, the world’s leading consumer product supplier, is store (their tenth in China) in Dongli District. The suburban location building one of its largest production bases in Tianjin. The facility, is situated between Central Tianjin and Tianjin Binhai New Area, located in Tianjin Airport Economic Zone, will cover a site area of next to a light rail line and close to several major highways. The 800 acres. Phase one of the project, incorporating 400 acres and 46,000 sq m store includes showrooms, restaurants and the largest a total investment of US$100 million, started construction in 2011. IKEA children’s playground in China. The base will increase its capacity continuously while producing items such as washing-up liquid and toothpaste for the Chinese GE to set up Medical Equipment Project in Tianjin Port market and for exports to nearby Asian markets. US-based GE, one of world’s largest electrical and electronic manufacturing companies, recently announced plans to build a E-Commerce gathering strength in Tianjin large-scale medical equipment manufacturing facility in the Tianjin Taking advantage of its skilled workers, recent high-tech Port Free Trade Zone. With a total investment of US$70 million, developments and its strategic location near Beijing, Tianjin the project’s first phase will focus on producing high-end precision has become the preferential location for e-commerce operators. medical equipment. Once complete, it is anticipated that the facility Adding to the current pool of globally recognised e-commerce will be one of GE’s largest production bases anywhere in the world. companies, such as Alibaba and Amazon, other e-commerce The Free Trade Zone has attracted 21 projects from Fortune Global companies have either relocated to the city or have plans to 500 companies, and from existing companies in the area including do so; these include Sohu Video, OkayBuy and Dangdang. Mitsubishi, Samsung, Carrefour and Ford. Sohu Video recently invested US$20 million in the construction of its Northern China headquarters in the Tianjin Economic- Archer Daniels Midland Company (ADM) plans Grain and Oil Base in Tianjin Technological Development Area of TBNA, and OkayBuy has ADM, a US-based Fortune 500 company, has announced a selected Sino-Singapore Tianjin Eco-City for its back office cooperation agreement with the Binhai New Area Economic Port operation. Meanwhile, Dangdang has Zone that will lead to the development of a food-focused logistics invested RMB 400 million in setting and processing plant responsible for grade sugar syrup production, up its Northern China headquarters flour milling and edible cellulose production. The project’s first phase in Wuqing District. The arrival of will cover a site area of 490,000 sq m, which will be significantly these e-commerce businesses will larger than COFCO’s plant in Tianjin, ADM’s main competitor. The play a large part in Tianjin’s ongoing project began construction in 2012 with an allocated investment economic growth, at the same time of US$300 million. ADM’s presence in Tianjin is expected to help strengthening demand within the create further opportunities for future cooperation in related fields property market. within the food industry chain. 18 China’s City Winners

Real Estate Overview Key Players Investors Real Estate Dashboard Office Local developers Ningfa, Tianfang Group, Tifen, Wanshun Market Size Domestic Beijing Financial Street, CITIC, Offices Grade A (sq m) 308,000 developers COFCO, Forte, R&F Properties Retail (sq m) 2,430,000 Foreign developers CapitaLand, GIC, Hutchison High-end Residential (units) 33,000 Whampoa, Kerry Properties, Tishman Speyer Market Activity Retail Local developers Modern Group, Quanyechang, Office Vacancy Grade A (%) 25.0% Wanlon, Yishang Group Retail Vacancy (%) 4.0% Domestic CITIC, COFCO, Hisense, Pengxin, Benchmark Values developers Tee Mall, Wanda Offices Grade A – Rents* (RMB/sq m/month) 150 Foreign developers CapitaLand, GIC, Hang Lung, Isetan RDM, SM Group Retail – Sales Turnover (RMB/sq m/month) 2,200 Residential Local developers Hongze, Ningfa, , Tianfang High-end Residential Prices (RMB/sq m) 21,000 Group, Wanshun Note: Data as at 2012 Q4 Domestic , Beijing Financial Street , R&F * Grade A office rents refer to gross rent GFA including PM fee developers Properties, China Merchants, Poly, Source: Jones Lang LaSalle , Beijing Capital Land, Sino -ocean Land, Vantone, Key Transactions Gemdale Investors Foreign developers Hutchison Whampoa, Keppel Land, Kerry Properties, Sunway, Wharf, Bank of bought 35,000-sqm office Yanlord Communications space and 10,000-sqm retail podium of Xinyin building in Q2 2010. Industrial Local developers TEDA T&B holding Beijing Financial Beijing Financial Street bought a 79,600-sqm mixed- Domestic , Liando, ZTE Street use plot in central Tianjin in Q3 2011, at a price of developers RMB 2.36 billion. Foreign developers GLP, Goodman, Mapletree Poly and Sunac Poly Real Estate and a local Tianjin developer, Occupiers Sunac Holdings acquired an 117,000-sqm plot in Office Logistics and Shipping COSCO, K Line, Kuehne-Nagel, downtown Tianjin for RMB 2.99 billion in Q3 2011. Maersk Beijing Bank Beijing Bank purchased the 21,000-sq m Block C Finance BNP, Deutsche Bank, JP Morgan, office tower of Tianjin Metropolis in Q4 2011. Samsung Property Insurance Services Firms Deloitte, Jones Lang LaSalle, PwC, Preferred Freezer Preferred Freezer Services acquired a 40,000- The Executive Centre Services sqm plot in Tianjin port to establish refrigerated Real Estate Hutchison Whampoa, Sohu, warehouse in Q4 2011. Tishman Speyer Parkson Parkson purchased a 45,000-sqm retail property en Retail Marts/CVA Carrefour, E-mart, Walmart, bloc for RMB 700 million in Q4 2011 7-Eleven Alibaba Group In Q2 2012, Alibaba Group announced plans to build Department Store Far Eastern, Isetan, Lotte, Parkson, an e-commerce logistics centre in Tianjin Wuqing Robbinz, Van’s District, with a total investment of RMB 3 billion and a Shopping Mall Aqua City, AEON, Hisense Plaza, land area of 1,000,000 sq m. Joy City Industrial Food and Beverage COFCO, Nestle, Pepsi, Tinghsin, Occupiers Yakult PwC PwC leased 1,500 sq m in the Exchange Tower 2 in Electronic Freescale IBM, LG, Motorola, Q2 2011 Samsung JP Morgan JP. Morgan relocated to Tianjin World Financial Daily Consumer Goods P&G, Unilever, Unicharm Centre and leased 700 sq m in Q2 2011 Auto Toyota, Volkswagen, Forte Group Forte leased 1,500 sq m in Xinyin Building in Q3 Biomedical GSK, Novo Nordisk 2011 Petrochemical Industry CNOOC, PetroChina, Shell New Energy Gamesa, Vestas Huawei Huawei rented 1,850 sq m in Tianjin World Financial Aviation industry Airbus, , Boeing, Goodrich Centre in Q4 2011 for relocation State Bank of SBI leased 550 sq m in Tianjin World Financial India (SBI) Center in Q3 2012 to open a branch in the city Tianjin City Profile 2013 19

Jones Lang LaSalle’s View

Logistics Offices

As one of the main logistics hubs in Northern China, the central The dominant sectors driving absorption in the Tianjin office government hopes to develop Tianjin, and more specifically the market are financial, professional services, trading, manufacturing, TBNA, into an international logistics centre, taking advantage and shipping and logistics companies, with average space leased of its geographic location along the coast and also riding the in the region of 400-700 sq m. Grade A office properties are mainly wave of recent interest from international logistics developers occupied by leading MNCs and well-known domestic companies, such as Gazeley and Mapletree. In order to improve the city’s while domestic SMEs, attracted by lower rents, are mostly logistics base, considerable policy and fiscal support have been clustered in Grade B buildings. Due to a lack of available space injected, with the government boosting its investment in Tianjin’s and deteriorating qualities in their existing buildings, an increasing infrastructure, including improvements to its port, airport, railways number of companies are preferring to select new and better- and an various expressways. It is also offering preferential quality office buildings for expansions and upgrades. Upgrades are policies - Dongjiang Free Trade Port Zone, for example, offers becoming a major force behind Tianjin’s office leasing activities. tax-free incentives and an efficient customs clearance capability.

Residential Retail

Before 2004, local developers were the main players in the city’s Retail development in Tianjin has historically fitted into residential market. Since then, however, the residential market three categories: department stores in traditional shopping has become more diversified in terms of developers’ background, destinations, hypermarket-anchored community centres and product types and development areas. Most high-end residential street-front shops. Until recently, domestic brands, particularly properties are situated within the four major submarkets of apparel brands, have dominated the retail scene. However, over Central Tianjin: namely Heping District, Meijiang area in Hexi the last few years, in tandem with the opening of new shopping District, the Old Town Area and the Olympic Center in Nankai centres, international retail developers and brands, eyeing District. Along with increased unit availability, sales volumes strong retail sales growth, have sped up their expansion into the within the residential sector have increased. Local residents who city. The shopping mall is now ‘the’ retail category in the city, are purchasing properties mainly for their own occupation or accounting for roughly 87% of retail property completions (GFA) upgrades are still the main contributors to demand. by 2012, and is expected to heavily influence the retail sector over the next five years. 20 China’s City Winners

Logistics Offices Continues to benefit from Tianjin’s manufacturing base Domestic firms are the main driver for office space demand It was not until 2007 that Tianjin’s logistics market started to witness The Tianjin office market has grown in size and geographic reach over any notable increase in new supply, boosted by the arrival of a the past five years, albeit from a low base. Within the central city, its number of international logistics developers including Gazeley, GLP four major office submarkets - Nanjing Road, Xiaobailou, Youyi Road and Mapletree, and their involvement in some significant projects. and Haihe Riverside - are home to the prime office buildings and key These and other international players have not only brought higher MNC and domestic tenants. construction standards, but also new and more comprehensive • Nanjing Road continues to be the primary and best-performing logistics services; furthermore, the healthy competition among Grade A office submarket due to its central location, mature developers and 3PLs is encouraging an improvement in market environment and convenient access to various transport modes. transparency and accelerating the maturity of Tianjin’s logistics market. • Xiaobailou, an older submarket of Grade B office buildings, is mostly occupied by domestic trading, real estate, and shipping Compared with cities like Shanghai and Beijing, Tianjin’s good and logistics companies. transportation infrastructure, its accessibility to other major cities and, most importantly, its lower industrial land and operation costs, • The Youyi Road submarket is mainly occupied by domestic are key factors contributing to the city’s attraction for logistics financial companies. developers. • Haihe Riverside is an emerging office submarket, particularly Logistics demand in Tianjin is being generated from companies with the opening of the TWFC (Tianjin World Financial Centre). serving the major manufacturers in industries like petrochemicals, It is projected to see further significant real estate activity in the electronics and automotive, and also from retail related players. next few years, particularly with a large portion of the city’s future In particular, e-commerce enterprises, especially B2C or online projects through to 2015 being concentrated in this area, due to shopping, are hitting record sales levels in China, and as with other active government promotion. cities are generating strong demand for the logistics sector in Tianjin. Submarket Nanjing Road Xiaobailou Youyi Road Haihe Overall, low vacancy rates and increasing demand for non- Riverside bonded space continues to boost the growth of non-bonded rental Key Features Tianjin’s CBD An older Financial- An emerging property which has outperformed that for bonded projects. Several submarket, focused office seeing submarket submarket well-known international logistics developers and investors are additional continuing to seek opportunities to acquire land for new logistics new facilities, and although they are primarily focused on Tianjin’s core development economic development areas such as TEDA, Xiqing District and Key Occupiers Multinational Domestic Domestic Financial, financial and trading and financial and professional the airport area, increasing land scarcity and difficulties negotiating professional shipping real estate services, with governments, now mean that they are extending their search services & logistics companies, and shipping across the region. After several months of negotiation with local companies companies near to city & logistics as well as government companies governments, a few agreements were finally settled in 2012, and real estate offices these new non-bonded projects will ease the tight supply situation enterprises over the next several years. Asset Primary Grade B Grade B Future Characteristics Grade offices offices Grade A A office office submarket, supply direct subway clustered connections here Tianjin City Profile 2013 21

The completion of TWFC has added 205,000 sq m of office space to the market, effectively tripling the volume that had existed over the past three years to a total Grade A office stock that now exceeds 300,000 sq m. TWFC has therefore provided much needed space for tenants who, previously, had little space to expand.

Overall, domestic firms are providing the strongest leasing demand in the Tianjin market, while MNC and domestic financial institutions and professional services firms have driven demand for Grade A office space as they seek to open branch offices in Tianjin as the city expands as a financial centre for Northern China. Likewise, as the city develops as a logistics hub, shipping and logistics firms along with trading companies have also provided a steady demand for office space. Most companies’ preferences are for new buildings to meet their expansion and upgrade requirements.

With the arrival of high specification projects, and given high occupancy rates in existing projects, average office rents grew by 4.4% in 2012 to stand at RMB 127 per sq m per month. Future rental growth will depend upon how tenants perceive the quality and location of new projects. There is currently a lack of wholly-owned and well-managed offices to choose from, and most buildings are sold as strata-title – thus restricting the type of space sought by MNCs.

A mixed outlook for 2013-2015 Over the next few years, Central Tianjin’s office stock will substantially grow in size, but most buildings will be sold strata-title, as many developers either need funds or lack confidence in the market. The Tianjin Binhai New Area will potentially add a large amount of new space; however, most observers don’t expect this supply to impact Central Tianjin’s market. If the economy, and especially the service sector, continues to grow strongly, there could be a significant increase in demand for office space, helping to boost rental growth, despite large amounts of space being completed both in the city and the TBNA. The final outcome is less than clear and will depend both on how developers approach the market and the level to which occupiers are concerned with the ownership and operational structure of new buildings. 22 China’s City Winners

Residential purchasers. The focus of these measures was to prevent residential prices from rebounding. So far they have been effective, with prices Greater product diversification increases and overall sales activity being relatively muted. The 1990s saw relatively few high-end residential projects emerge in Looking forward, Tianjin is one of the fastest expanding cities in China Central Tianjin, but, since 2004, the residential market has boomed in terms of its population growth, and given this and an anticipated in terms of construction and price growth. After several years of rapid strong local demand from residents for purchasing units for their own development, the market has evolved and matured; once dominated use, we believe that the outlook for Tianjin residential market remains by local players, its composition is gradually changing as more large one of stability, with an upward trend over the longer term. domestic and foreign developers launch projects, such as Poly, Kerry, Hutchison Whampoa and Yanlord. Retail Supply New completions bring a more sophisticated shopping High-end residential stock (units) 33,000 environment Demand Prime-quality retail projects are currently distributed in six submarkets High-end residential sales rate 64.0% of Central Tianjin: Binjiang Avenue and Heping Road (pedestrianised Asset Performance streets), Nanjing Road, Xiaobailou, Youyi Road and Old Town Area. High-end residential capital values (RMB/sq m) 21,000 While Nanjing Road and the pedestrianised streets are still considered Note: Data as at 2012 Q4 to be the premier retail precincts (with the highest footfall), the Old Source: Jones Lang LaSalle Town area, with three new shopping centres opened in 2011 and an Greater product diversification is also emerging as many of these upcoming Parkson’s Department Store (totalling 275,000 sq m), is larger developers begin to bring various types and sizes of units to quickly emerging as a major retail submarket as it attracts a greater the market. For example, Hutchison Whampoa has launched the share of retail traffic. development of three high-rise residential towers in their mixed-use International developers and operators such as Lotte Group from project, Metropolitan Heights, along Nanjing Road. The project aims to Korea, SM Supermalls from the Philippines, and Hang Lung and differentiate itself with several ‘rooftop villas’ and a large outdoor green Hutchison Whampoa from Hong Kong, have all entered the Tianjin space on top of its retail podium. Tianjin Metropolis, developed jointly retail market, introducing a number of large-scale shopping centres by Beijing Financial Street and Poly Real Estate, is another example, that feature imaginative designs and layouts. As a result, shopping introducing a 646 sq m fit-out unit per floor to the market; given the centres with a more comprehensive retailer mix are beginning to make large average size of each, they remain, to date, the largest residential up a larger proportion of the market, compared to older traditional units for sale in the city’s high-end residential market. department stores that, for example, provide limited food and Although Tianjin’s residential market has seen rapid growth since beverage facilities. 2004, demand has kept pace with supply, indicating the strong Since 2007, international retailers such as, Zara, H&M, C&A, Louis market acceptance of high-profile residential projects. Local residents Vuitton, Chaumet, Salvatore Ferragamo and Bottega Veneta, have purchasing residential properties mainly for their own-occupation been drawn by Tianjin’s strong spending power and growth potential, or for upgrading will still be the predominant driver of demand. The and have made their debuts in different projects in the city; this has steady demand for owner-occupation indicates that Tianjin’s high-end elevated pre-commitment rates in most of the new retail malls. residential property market is healthy yet not overheated. The market’s incumbent players are now shifting their focus into With a sharp increase in capital values for the city’s residential enhancing the shopper experience and, as a consequence, Tianjin’s properties during 2009-2010, the local government in tandem with retail offer is beginning to catch up with its economic development the central government started to issue tightening measures from trajectory. Q1 2011 to control sales prices. Under the new regulations, tighter control was enforced on purchasing rights and financing options for Tianjin City Profile 2013 23

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