Chengdu Property Market Review (3Q09)
October 2009
Grade A Office
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Grade A Office Market in 3Q09
Key Points • Market is Recovering with More Demand • Occupancy Rate Improved with Rising Demand • Demand from New Setup Recovered • Rents Continued Descending
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Grade A Office Market in 3Q09
Overview
Indicator Total Stock (sqm) 3Q09 455,000 q-o-q 0.0% y-o-y 0.0%
Absorption (sqm)
4,643
↑39.1%
↓94.8%
Vacancy
16.8%
↓1 pts
↓3.3 pts
Rent (RMB/sqm/month)
91.6
↓1.9%
↓11.1%
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Chengdu Grade A Office Supply
800 700 600 Thousand sqm 500 400 300 200 100 0 98 99 00 01 02 03 04 05 06 07 08 09* 10* 11* 12* or after
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Chengdu’s Grade A Office Supply
800,000 700,000 600,000
ICC IFC
500,000 sqm 400,000 300,000 200,000 100,000 0 2008
Air China Century Centre Lippo Tower Jinjiang International Hailrun Complex Aerospace science Building Yanlord Landmark Air China Project 2 New Hope Plaza Raffles City City Tower Phase 3 Wharf Office (New South Project) Hilton Office Tishmen Speyer Chinese Estates Office KWG Project Wharf Office (Dongda Street Project)
2009
Renmin S. Rd Dongdajie
2010
Chunxi Rd South Area
2011
2012or after
Yanshikou-Tianfu Square Luomashi-Shuncheng Street
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Future CBD Grade-A Supply
What is already under construction?
800,000 700,000 600,000
ICC IFC
500,000 sqm 400,000 300,000 200,000 100,000 0 2008
Air China Century Centre Lippo Tower Jinjiang International Hailrun Complex Aerospace science Building Yanlord Landmark Air China Project 2 New Hope Plaza Raffles City City Tower Phase 3 Wharf Office (New South Project) Hilton Office Tishmen Speyer Chinese Estates Office KWG Project Wharf Office (Dongda Street Project)
2009
2010
2011
2012or after
Under Construction
Proposed
Completed
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Grade A Office Location – Traditional CBD
1 2 3 4 5 Yanshikou-Tianfu Square Precinct
2 8 5 3 1 1 3 7 2 6 9 12 4 8 11 6 4 5 10
Existing Projects
Chuanxin Mansion First City Plaza City Tower Western Tower Times Plaza Plaza Central Unionsun-Yangkuo International Plaza Shangri-La Centre Lippo Tower
Chunxi Rd Precinct
6 7 8 Dongda Street Precinct 9
10 Air China Century Centre
Future Projects
1 Aerospace Science Building 2 Yanlord Square 3 Jinjiang International
South Renmin Rd Precinct
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4 Wharf (Dongda Street Project) 5 City Tower Phase 3 6 Raffles City 7 New Hope Plaza 8 Chinese Estates Office 9 Tishman Speyer
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Existing Projects Existing Office Cluster
Future Projects Future Office Cluster
10 International Financial Centre 11 International Commercial Centre 12 Hailrun Complex
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Quality Office Location – New South Area
Future Projects
13 Air China 2 14 KWG 15 Hilton Project 16 Wharf Office (New South)*
16 14 13 20 17 18 19
17 Sichuan Investment Group Project 18 Intraxx Plaza 19 Hengzedongli Building 20 La Defense
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Future Project
Note: Might change to 40 years tenure services apartment for sale
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Selected Grade A Building-Jinjiang International
Jinjiang International
• • • • • • • Total GFA: Office GFA: Whole Floor Efficiency: Floor: Clear height Typical Floor Size: Passenger Lifts: 82,571 sqm 33,000 sqm 70% 25 floors above ground 3m 1,300 sqm 5, 3.5m/sec
•
Average Price:
RMB 90-110 per sqm per month
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What is Driving Office Demand in Chengdu?
Demand from New Setup Recovered
Expansion 7%
• In 3Q09, we tracked 43 leasing deals totalling 10,102 sqm, up 32.5% q-o-q. • According to transacted area, new setup was the largest source of demand.
New Setup 69%
Upgrade 24%
• Upgrade and Expansion occupied 31% of total tracked transactions, becoming active as a result of declining rents.
Note: Total transaction area is 10,102 sqm. Source: Jones Lang LaSalle
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Which Industry Drives the Demand?
Financial and Business Services are Major Drives
Transportation/Logistics Trade 2% Manufacturing Business service 6% IT & Communications 6% 20% 5% Hi-tech Construction/Real estate 10% 14%
Financial service 26%
Consumer product Energy & Mining 8% 3%
• Enterprises from financial service and business service are active in 3Q09, accounting for 26% and 20% of total tracked transactions respectively. • As corporate business recovers when enterprises gradually walk out of the shadow of global financial crisis, financial service and business service continue to be the major industry drives of Chengdu Grade A office market.
Note: Total transaction area is 10,102 sqm.
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Grade A Office Demand
250,000
Absorption recovery to coincide with more domestic demand + economic growth
35.00%
30.00% 200,000 25.00% 150,000 Sqm
100,000
15.00%
10.00% 50,000 5.00%
0 2002 2003 2004 2005 Supply 2006 2007 2008 2009 2010 2011
0.00%
Absorption
Vacancy
Vacancy
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20.00%
Vacancy Rate
Vacancy Rate Dropped Slightly
35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 16.8%
• The vacancy rate fell from 17.7% to 16.8% q-o-q as leasing demand of Chengdu Grade A office market improved.
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Rental
Rental Kept Downward Trend
120.0 100.0 RMB per sqm per month 80.0 60.0 0.0% 40.0 20.0 0.0 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 -2.0% -4.0% -6.0% Rent q-o-q growth 8.0% 6.0% 4.0% 2.0%
• In 3Q09, the rent of Chengdu Grade A office continued declining to RMB 91.6 per sqm per month and witnessed a yearly drop of 11.1%. • Facing with the competition from the coming high-quality supplies, landlords offer more incentives to attract new tenants and retain existing tenants.
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Major Leasing Transactions
China International Capital Corporation Limited New Set-up Shangri-la Centre 600 sqm
Upgrade Plaza Central 883 sqm
New Setup Plaza Central 883 sqm
Upgrade Plaza Central 883 sqm
Thai Airways Upgrade Plaza Central 291 sqm
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Outlook
• Rents will continue seeing downward trend in the year end. • Enterprises would like to concentrate in quality offices as rents become affordable. • Relocation, upgrade and expansion will emerge to occupy sizeable share of office demand drive.
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Retail
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Prime Retail in 3Q09
Key Points • • • • No New Quality Retail Properties Came to Completion Retail Sales Kept Strong Performance Adjustment of Tenant Mix Has Been a Norm Luxury Brands Started to Take Moves
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Chengdu Retail Market
Key Indicators
Indicator 3Q09 q-o-q y-o-y
Total Stock (thousand sqm) Absorption (sqm)
1,410
0.0%
0.0%
6,972
↓25.5 %
↓8.4 %
Vacancy Rate
9.3%
↓0.6 pts
↓1.2 pts
Average Rent (RMB/sqm/mon)
384
↑0.4%
↓ 0.6%
*Note: Average rent refers to the rental level of ground floor in major shopping malls.
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Chengdu Retail Supply
Tight Supply in 2008 and 2009
600 500 Thousand sqm 400 300 200 100 0 2009* 2010* 2011*
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2000
2001
2002
2003
2004
2005
2006
2007
• No new retail property entered the market in 3Q09.
2008
Future Chengdu Retail Supply
Shopping Malls will Dominate the Market
800,000 700,000
ICC
600,000 500,000
Sichuan Culture City
IFC
sqm
400,000 300,000 200,000 100,000 0 2009
Yanlord Square Tishman Speyer Maoye Dept Store P2 Chengdu Baiyang Building Robinson Mall Raffles City Maoye (South) Wharf (dongda St) International Plaza City Tower P3 Chicony Dept Store KWG
Ito Yokado
Renhe Spring Plaza E-Go
Galleria Aerospace Science Building Renhe Spring Dept Store P3
2010
2011
2012 or after
Department Store
Shopping Mall
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Existing Retail Property Location- CBD
1st Ring Rd
Luomashi Precinct
12 14 4
Existing Project
1 People’s Department Store 2 Parkson (Times Plaza) 3 Pacific Department Store (Chunxi Store) 4 Pacific Department Store (Quanxing Store) 5 Ito-Yokado (Chunxi) 6 Renhe Spring Department Store (Rendong)
Chunxi Road Precinct Yanshikou & Tianfu Square Precinct
6 1 16 9 8 17 10 20 7 3 2 11 18 5 19 13 15
7 Wangfujing Department Store 8 Beijing Hualian 9 Mall Parkson 10 Maison Mode Phase I 11 Pacific Department Store (Chunxi New) 12 New City Plaza 13 Champagne Plaza 14 Platinum City 15 Seibu 16 New World Department Store 17 Fortune Centre 18 Top City 19 Isetan
Existing Property
20 Maison Mode Phase II
Note: Existing retail properties in CBD are mainly located in the three major retail precincts, Chunxi Road, Yanshikou & Tianfu Square and Luomashi
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Future Retail Property Location - CBD
Future Project
1 2 3 Ego Aerospace Science Building Renhe Spring Department Store (Phase 3) Yanlord Square Chicony Department Store Wharf Retail (Dongda St) City Tower Phase 3 Tishman Speyer International Plaza
1st Ring Rd
4 5 6 7 8
12 3 14 13 9 2 4 5 1 11 8
9
10
10 International Financial Centre 11 Sichuan Cultural City 12 Chinese Estates Project 13 Chengdu Baiyang Building
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7
14 MOI Department Store
Future Property
Note: Chunxi Road and Yanshikou remain the leading prime retail precincts in Chengdu in the future while Luomashi is losing favor due to the shortage of land supply and relatively poor planning.
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Retail Property Location – Non-CBD
3rd Ring Rd 1st Ring Rd
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Existing Project 2nd Ring Rd
1 2 3 Ito-Yokado Shuangnan Store Renhe Spring Department Store (Zongbei) Tianfu Brilliance Shopping Mall Beijing Hualian (Shuangqiaozi) Xidan SM City CapitaRetail Mall Dadi Xinguanghua Kingson Shopping Mall
3
5 6 1 8
4 5 6 7
9
8
1 4
9
4
10 Wanda Plaza
2 2 10
Future Project
1 Renhe Spring Department Store (Guanghua Store) Raffles City ACE Robinson Mall International Commercial Centre
3
2 3 4
Note: Non-core locations, particularly between 2nd and 3rd ring roads attract a number of shopping mall developers to develop large scale retail properties which are expected to attract residents in the surrounding areas.
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Retail Properties to Come in 2009
Ego (Open in 2nd October) 18,000 sqm 4Q 2009
Renhe Spring Plaza 48,420 sqm 3Q 2009
Ito Yokado (East) 32,000 sqm 4Q 2009
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Selected Property – Renhe Spring Plaza
Renhe Spring Plaza
• • • • • • Open Date: Total GFA: Retail GFA: Typical Floor Size: 3Q 2009 137,954 sqm 48,520 sqm 7,400 sqm
Asking Rent (Ground Floor): RMB 300-400/sqm/month Pre Leasing Rate: 70%
Major Tenants • • • BURBERRY MaxMara Emporio Armani • • • POLO GIVENCHY Aquascutum
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Supply and Demand
600 500 400 Thousand sqm 300 200 100 0 2009* 2010* -100 Supply Take-up 2011* 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
• Demand still mainly came from tenant mix adjustment. • Net take up of Chengdu retail market amounted to 6,972 sqm in 3Q09.
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Chengdu Retail Sales
Growth Rate Kept on High Level
180 160 140 120 RMB bln 100 80 60 40 20 0 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* Retail sales
Note: 2009* refers to the first eight months’ figure. Source: Chengdu Bureau of Statistics
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25.0% 20.0% 15.0% 10.0% 5.0% 0.0%
y-o-y growth
Vacancy
Vacancy is Expected to Drop Continuously
30.0% 25.0% 20.0% 15.0% 9.3% 10.0% 5.0% 0.0% 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09
• Vacancy stayed stable due to limited supply. • Average vacancy rate merely dropped 0.6 percentage point q-o-q to 9.3%.
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Rental
Rent Witnesses Slight Increase
450.0 400.0 350.0 RMB per sqm per month 300.0 250.0 10.0% 200.0 150.0 100.0 0.0% 50.0 0.0 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 -5.0% 5.0% 15.0% Rent q-o-q growth 20.0% 25.0%
• Average rents of major shopping malls (ground floor) reached RMB 384 per sqm per month in 3Q09, up 0.4% q-o-q.
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Major Retailers in 3Q09
Adjustment of Tenant Mix has been a norm
Maison Mode Lessin 120 sqm
Maison Mode Tianyi 100 sqm
Maison Mode Tianyi 20 sqm
Wangfujing 50 sqm
Fortune Centre 150 sqm
Platinum City 500 sqm
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Outlook
• Strong consumption of Chengdu will sustain. • Chengdu will see a more diversified retail market. More retailers are seeking opportunity to enter Chengdu. • More presence of luxury and high end brand are expected. • Submarkets in mature residential communities develop and grow.
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High-end Residential
*Note: Here high-end residential refers to apartments.
High-end Residential Market in 3Q09
Key Points • 1,220 Units of High-end Residential Were Launched for Presale • Transactions Remained Active as the Recovery Sustained • Sales Price Witnessed Considerable Growth
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High-end Residential Market in 3Q09
Overview
Indicators 3Q09 q-o-q y-o-y
Total stock (units) Pre-sale supply (units)
24,313
↑7.7%
↑89.7%
1,220
↓7.2%
↓25.2%
Sales rate
33.8%
↑17.2 pts
↑19.9 pts
Price (RMB/sqm)
9,398
↑5.9%
↓0.1%
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Transaction Volume
5,000 4,500 4,000 3,500 3,000 unit 2,500 2,000 1,500 1,000 500 0 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 Presale units Sold units
• 1,220 units of high-end residential were launched for presale. • After the peak in 2Q09, transactions remained active but less stronger than the previous quarter as prices climbed up.
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Major New Launches – High-end Residential
Tianfu Times Square by Wharf Dongda Street 260 units
One City South by China Overseas New South Area 92 units
Jade City by China Resources City East, 2nd ring Rd 496 units
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High-end Residential Demand
Transactions Remained Active
100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 33.8% 20.0% 10.0% 0.0% 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09
• In 3Q09, the sales rate reached 33.8%, down 17.2 pts q-o-q. But the figure still stood 19.9 pts higher compared with 3Q08, sustaining active trend.
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High-end Residential Price
Newly Completed Projects in Secondhand Market Drove up Prices
12,000 9,398
10,000
8,000 RMB per sqm
6,000
4,000
2,000
0 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09
• Average prices of Chengdu’s high-end residential market picked up to RMB 9,398 per sqm, rising 5.9% q-o-q.
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High-end Residential Rent
55.0
50.0 RMB per sqm per month
45.0 45.7 40.0
35.0
30.0 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09
• Average rental for high-end residential units dropped 4.7% q-o-q to RMB 45.7 per sqm per month.
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Selected High-end Residential – One City South
One City South Phase I
• • • • • • Area: Greenery Ratio: Total GFA: Total Units: Unit Proportion: 170,226 sqm 1,116 units 2-bedrooms: 41.2%；3-bedroom:12.4%；4； ； bedroom: 29.8%；5-bedroom:15.6%；6-bedrrom:1% ； ； 89-370 sqm 75%
• • • •
Car Parking Ratio: Management Fee: Architectural Form: Asking Price:
1:1 RMB 2/sqm /month High-rise building (24 floors) RMB 9,000-11,000 /sqm
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Outlook
• Though sales market remained active and positive, the sales rate is expected to slow down as prices rise. • Home buyers may pick up waitand-see attitude again by rising prices and policies.
Source: Longfor Century View
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Thanks!
Jones Lang LaSalle Surveyors (Shanghai) Co., Ltd. Chengdu Branch Room 04-06, 12/F, Tower 1, Plaza Central 8 Shuncheng Dajie, Chengdu 610016, Sichuan, China Tel +86 28 6680 5000 Fax +86 28 8665 1021
Jones Lang LaSalle is a professional services firm specializing in real estate. We offer integrated services delivered by expert teams worldwide to clients seeking increased value as the owners, occupiers or investors in real estate. We serve clients in 60 countries from 750 locations worldwide, including 180 corporate offices.
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