M. Imam Wibowo

Released by Jones Lang LaSalle, the report predicts that the China business park market is poised for lift-off

Shanghai, 23 June 2008 – Jones Lang LaSalle released its latest research today, China Business Parks – The next real estate opportunity, the first and the most comprehensive study so far on China’s emerging business park sector.

With the rapid evolution of the business park market in China, the latest report from the firm’s World Winning Cities research programme identifies 15 future business park hotspots across China which are expected to offer the most robust real estate prospects.  The report reviews the future drivers of growth, and assesses how the development and investment landscape is likely to evolve over the next few years.

China’s emerging business park sector offers robust demand fundamentals; demand is underpinned by the expansion of R&D activities of hi-tech and pharmaceutical firms seeking higher specification space, by the rapid growth in Business Process Outsourcing (BPO), and by large MNCs increasingly seeking campus style space outside of higher cost CBD locations.  In addition, the government’s strategy to move the Chinese economy up the value chain and its policy of mapping out R&D and BPO clusters across the country is also serving to boost demand drivers.

“In this report, we identify 15 business park hotspots across China, which we predict will be the focus of future business park activity over the next decade,” noted Jileen Loo, head of business park sector for Jones Lang LaSalle China. “The stock of business park space in China, which is estimated at circa 17 million sq m, is expected to more than double to around 38 million sq m by 2010 (based on stock estimates in 15 cities).  Over 60% of the current stock is located in four cities – Shanghai, Beijing, Dalian and Guangzhou. A number of other cities, such as Chengdu, Suzhou, Xian and Tianjin, are expected to witness a sharp increase in business park activity over the next few years.”

Jones Lang LaSalle’s research has grouped these 15 cities into three categories – Prime Markets (pioneers in high quality business parks), Transitional Markets (developing differentiation and a niche) and First Mover Advantage Markets (offering generous incentives).  See Chart below.

In the report, both business park activity and investment risks were assessed in order to position each of the 15 cities on a market potential v risk continuum.  Each group offers different business park opportunities and characteristics for occupiers, developers and investors. “We believe that this classification will set the benchmark for real estate players to assess market opportunities over the next decade.” Jileen noted.

While facing strong competition and tighter commercial property regulations, the business park sector is attracting international developers and investors. “To date, Ascendas, Goodman, Frasers Property, Shui On and CapitaLand have been the most active international developers. A number of US investors have also expressed interest in the business parks sector, primarily the Tier I cities.” Stuart Ross, head of industrial China for Jones Lang LaSalle noted, “With the credit crunch affecting the US markets in 2008, there is a new spotlight on investment opportunities in China, but the long term impact on the business park investment in this market remains to be seen.”

“So far, there are still very few dedicated domestic business park developers – Software Park China, which developed Dalian Software Park, is currently the most active.  However, the business park market opportunities are also starting to attract more domestic players, with companies such as Raycom and TecPark Development now entering the market,” added Stuart.

Currently, with relatively few projects meeting international investment standards, there are very few examples of actual transactions.  Most investors are adopting a cautious approach, but they are universally confident about growth prospects over the next five years.

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