Qianhai: Shenzhen's New Frontier

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COLLIERS FLASH OFFICE | RESEARCH | SHENZHEN | 20 AUGUST 2019 Rosanna Tang Head of Research | Hong Kong SAR and Southern China +852 2822 0514 QIANHAI: SHENZHEN’S NEW FRONTIER [email protected] The shift of Shenzhen’s business hub from east to west Yifan Yu Assistant Manager | Research | Shenzhen +86 755 8825 8668 [email protected] The CBD’s westward journey from the 1990s to present Summary & Justin Yi Recommendations Senior Analyst | Research | Shenzhen Baoan District +86 755 8825 8600 Shenzhen’s Grade A office [email protected] development has been gradually Nanshan District Luohu District shifting westwards over the last Qianhai Futian Cai- three decades. Today, Qianhai High wuwei CBD Tech CBD has established itself as the Park Futian District emerging CBD and a special Guimiao Double Layer Road 1 economic cooperation zone . Houhai Metro Line 5 Southern Extension Metro Line 9 Western Extension We are seeing the following trends in Qianhai: Qianhai (2018~) Houhai (2016~) High Tech Park (2004~) Futian CBD (2002~) Caiwuwei (1995~) Modern new CBD Mixed-use coastal Dedicated technology, Shenzhen’s downtown Former transport and with international area featuring advanced manufacturing with prime office and financial hub redeveloped To avail themselves of rental positioning modern design and logistics park commercial space in the mid-90s subsidies, financial and technology tenants will likely The Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone (Qianhai) is a 1,492 hectare (3,687 relocate or expand their business acres) waterside development area in the west of Nanshan district. Established in 2011, this area was designed to before the end of 2020. facilitate collaboration between mainland China and Hong Kong SAR* with a specific focus on the financial, logistics, technology and professional services industries. With Luohu District being surrounded by mountains, the Government incentives and city can only expand to the west, and this growth has been propelled by Shenzhen’s designation as a Special rental subsidies should generate Economic Zone in 1980. The Caiwuwei area in Luohu evolved into the initial business district in the 1990s. Since increasing investment and about 2002, Futian’s CBD, a specifically planned, new, modern city center, took the role of Shenzhen’s downtown. occupier interest from domestic From 2004 to 2010, Nanshan’s High Tech Park and Houhai started developing with the rise of the technology and overseas companies. industry. Nowadays, Qianhai is the latest frontier for development in Shenzhen. As Qianhai’s rent is currently Qianhai has seen massive urban development of infrastructure, commercial and residential real estate projects. As about 70% less than citywide of July 2019, total Grade A office stock in Qianhai was about 370,000 sq meters (3.98 million sq feet), accounting for about 6.7% of total citywide stock. As it is a new urban area, Qianhai has a large quantity of Grade A space average, we recommend tenants available, with average rents of RMB139 per sq meter per month (USD1.83 per sq foot per month). consider relocating before the Note: USD1 to RMB7.04 as of August 2019. 1 sq meter = 10.76 sq feet. *Hong Kong Special Administrative Region of the People’s Republic of China. 1The Authority of gap narrows. Qianhai, http://www.szqh.com.cn/What_is_Qianhai/Master_Plan/ COLLIERS FLASH OFFICE | RESEARCH | SHENZHEN | 20 AUGUST 2019 COMPANIES KEEP GOING WEST Major companies relocating to the west of Shenzhen, 2015 - 2019 Year Tenant Industry Origination New Location Area (sqm) As the Nanshan and Qianhai office markets gradually mature, the market has 2019 Aoyuan Real estate Futian CBD Houhai 4,000 witnessed more companies, especially those from technology and financial 2019 Colliers Real estate Futian CBD Houhai 500 sectors, relocating from Shenzhen’s eastern business hubs of Futian, and Caiwuwei to the new Grade A office hubs in the west. Some companies are 2019 Codemao TMT Houhai Qianhai 15,000 currently registered in Qianhai, but have their offices in Nanshan and Futian, 2019 Savills Real estate Futian CBD Houhai 900 and we expect them to move to Qianhai once its infrastructure is more 2018 OPPO TMT Futian Houhai 42,000 mature. 2018 Panasonic TMT Futian CBD High Tech Park 4,000 Pingan Smart Infrastructure construction in Qianhai includes the Metro Line 5 Southern 2018 TMT Futian Qianhai 50,000 City Extension and Metro Line 9 Western Extension. Both are planned to finish by King&Wood Professional 2018 Futian CBD Houhai 5,000 the end of 2019 with a combined 10 stops in Qianhai. Meanwhile, Guimiao Mallesons service Double Layer Road, which links Nanshan’s central area to Qianhai, should Professional open next year, easing congestion. 2018 KPMG Caiwuwei Houhai 7,000 service Once these infrastructure projects are completed, we believe more local 2017 Xerox TMT Futian Houhai 1,600 and Hong Kong companies will relocate to Qianhai. As of Q2 2019, there 2017 Centaline Real estate Futian CBD Houhai 12,000 were already more than 170,000 companies registered in Qianhai, of which 2017 Zheshang bank Finance Futian High Tech Park 20,000 11,231 were from Hong Kong1. 2017 Bank of Jiangsu Finance Futian CBD Houhai 10,000 Relocations to the west by select industries (GFA sq meters) 2016 Apple TMT Futian CBD Shekou 10,000 GFA sq meters Techology Finance 2015 OPPO TMT Futian Houhai 15,000 Professional Services Real Estate 100,000 2015 Qualcomm TMT Futian CBD Houhai 10,000 75,000 Source: Colliers International 50,000 Summary of rental subsidies policy 25,000 Lease date1 Before Dec 31, 2019 From Jan 1, 2020 to Dec 31, 2020 - Maximum Maximum 2015 2016 2017 2018 2019 Corporation Subsidy amount Subsidy amount Source: Colliers International Category2 percentage (RMB Million) percentage (RMB Million) POLICY INCENTIVES IN QIANHAI General 30% 3 20% 2 Special3 50% 5 40% 4 In June 2019, the government introduced office rental subsidies for qualified tenants relocating to Qianhai, as well as for owner-occupied premises. We Important 50% 5 40% 4 believe this will further attract companies to relocate to Qianhai before the Landlord 25% 25 15% 15 subsidies application window closes at the end of 2020. However, this policy Source: Measures of the Qianhai Shenzhen-Hong Kong Modern Service Industry Co-operation Zone relating is not applicable for subleased space, and should have little impact on to office rental subsidies for promoting the return of enterprises. 1The time frame that qualified companies lease office space in Qianhai. 2The Authority of Qianhai, Measures of the Qianhai Shenzhen-Hong Kong Modern sublessors and flexible workspace operators. Service Industry Co-operation Zone Relating to Office Rental Subsidies for Promoting the Return of Enterprises. 3 1 More than 50% of shareholders need to be from Hong Kong SAR. 2 The Authority of Qianhai COLLIERS FLASH OFFICE | RESEARCH | SHENZHEN | 20 AUGUST 2019 QIANHAI – THE EMERGING CBD Office and mixed-use projects development status in Qianhai Q2 2019 Total stock As a new urban area built primarily on reclaimed land, Qianhai was built Submarket (sq meters) from scratch with initially limited infrastructure. The majority of the Grade A Futian 2,940,000 building completed and under-construction are located in Qianhai’s Guiwan district. With 370,000 sq meters (3.98 million sq feet) of Grade A office Luohu 270,000 space, Qianhai has the third largest inventory in Shenzhen, after Futian and Nanshan 1,950,000 Nanshan. However, from 2019 to 2023, 1.9 million sq meters (20.5 million sq Qianhai 370,000 Gui feet) of Grade A office space is planned in Qianhai, accounting for 44% of Total 5,300,000 total new supply and the largest proportion of new supply in Shenzhen, Wan making it one of the most important office submarkets. On the back of 2019 - 2021 government support, and the maturing transportation and community New supply Submarket (sq meters) facilities, we believe Qianhai will attract more tenants in the future. Futian 790,000 Existing tenants by industry, Qianhai Luohu 40,000 Nanshan 1,630,000 Others 14% Qianhai 1,910,000 Trade 6% Total 4,370,000 Professional Services 7% Financial 46% Qian Technology 12% Wan Logistic 15% Source: Colliers International Ma RENTS TO CATCH UP HOUHAI Wan Comparing Futian to Houhai, Houhai also experienced relatively low rent during the early stages of its development. In 2014, Futian’s rent was Completed RMB229 per sq m/month (USD3 per sq ft/month) while Houhai was RMB139 per sq m/month (USD1.8 per sq ft/month). However, with buildings topped Under off and roads opened, the rental gap converged within four years. In 2014, Construction Houhai was 75% lower than Futian. But in H1 2019, Houhai was only 8% Metro Line 9 Metro Line 5 Proposed/ Under lower than Futian. We think Qianhai will go through a similar path. In July Western Extension Southern Extension planning 2019, there were 203 tenants in three fully operational buildings in Qianhai, with the financial, technology and logistics industries being the major Source: Colliers International. Note: On the map, unshaded land is either vacant land without arrangement yet occupiers. We believe the rental subsidy policy and the gradually maturing or already has existing structures. cluster will help Qianhai’s rent to catch up with Houhai’s in next three years. 3 Primary Author: For further information, please contact: Yifan Yu Alan Fung Assistant Manager | Research | Shenzhen Managing Director | Southern China +86 755 8825 8668 +86 20 3819 3998 [email protected] [email protected] Justin Yi Jenny Chou Senior Analyst | Research | Shenzhen Director | Office service | Shenzhen +86 755 8825 8600 +86 755 8825 8680 [email protected] [email protected] Contributor: Andrew Haskins Executive Director | Research | Asia +852 2822 0521 Mike Shen [email protected] Assistant Manager | Office service | Shenzhen +86 755 8825 8656 Rosanna Tang [email protected] Head of Research | Research | Hong Kong SAR & Southern China +852 2822 0514 [email protected] About Colliers International Group Inc.
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