Olympic Games to have “lasting” impact on Beijing
The impact of the Olympic Games on Beijing's real estate market will be lasting and positive as infrastructure expansion creates new commercial areas and supports the development of suburban residential hubs, according to Jones Lang LaSalle.
Furthermore, efforts to improve the environment are making Beijing a more comfortable place to live and conduct business in.
These conclusions were made in a White Paper titled Accelerating Toward a New Beijing by Jones Lang LaSalle, a global professional services firm that specializes in real estate. The paper examined how the Games would drive the transformation of Beijing.
Since Beijing won the Olympic Games bid in 2001, approximately $41 billion has been budgeted for the city's transformation, and a substantial portion of this has been invested in improving the environment and expanding infrastructure.
The aim of these investments is to change Beijing permanently and positively, and prepare the city for continued economic and population growth, according to David Hand, managing director of Jones Lang LaSalle Beijing.
Some analysts have said it is possible Beijing will see a downturn in its real estate market after the Games. “The reality, however, is that there is little direct correlation between the event and the key demand drivers that underpin Beijing's property growth,” said Hand.
According to Ben Christensen, head of research for Jones Lang LaSalle Beijing, the government, as part of its efforts to improve Beijing's development landscape, facilitated the completion of a large amount of new, high-quality spaces in key commercial areas through investment and construction approvals.
This has led to a substantial expansion in the high-end retail, office and residential sectors, which is a very positive development for the city.
“Almost inevitably, however, this will likely put slight downward pressure on rents in the period directly following the Games. Demand drivers supporting this development will continue to grow: Beijing is an increasingly critical location for office occupiers as they expand their presence in China; the demographics and consumer sentiment supporting the rapid development of the luxury retail market are expected to continue improving; and residential projects will likely continue to enjoy strong demand from both end-users and investors,” he said.
Christensen added that these demand factors have little direct correlation with the Games and are expected to underpin strong absorption across all sectors of the Beijing property market in the medium to long term.
In 2007 and 2008, Beijing's high-end property market has been undergoing a dramatic expansion as the total office, retail and residential space is anticipated to grow by 52%, 89% and 58% respectively.
The report said it is important to keep in mind that this expansion is building on a relatively small base at the top end of the market and that the figures represent the high end of the market as opposed to the mass market.
The increase is, nonetheless, substantial and is expected to lead to temporary oversupply conditions in the months following the Games. This impact will be short-term as anticipated strong demand is likely to absorb residual vacant spaces in 2010 and 2011 when new supply is expected to slacken.
Importantly, from a long-term perspective, during this ongoing increase in property supply, several key themes, such as high-quality property, unexpected by strong demand and a large consumer base, have emerged.
Prior to 2007, Beijing suffered from a shortage of international-standard office and retail space, so some large office space occupiers and retailers were forced to adjust their Beijing expansion plans.
But 2007 and 2008 are bringing new options and new opportunities for these occupiers with the completion of 10 new Grade A office buildings and entry of 11 new wholly owned shopping centers. Tenants now have high-quality options to choose from and international retailers are expanding rapidly, with some brands, such as Zara, expanding into several new locations in less than a year.
Retailers are also actively signing pre-leasing deals in upcoming new developments to ensure that they have a strong presence in Beijing's promising market.
The 2008 Games represents an opportunity for multinationals and luxury retailers to access China's population on an unparalleled scale. The need to have an established platform from which to launch these marketing campaigns has accelerated the China-entry process for some global companies. Additionally, luxury retailers and consumer product companies are eager to use this event to introduce China's huge consumer base to their products and culture.
The expansion of Beijing's transportation infrastructure is a change that will substantially impact the city's future development. This impact is broad and will also be a very powerful driver for property growth in Beijing.
Pedestrian traffic and connectivity for areas surrounding new metro stations will increase dramatically, enhancing access to new retail developments and driving up property and rental values.
Expanding the public transportation infrastructure into more suburban areas facilitates the development of peripheral residential hubs. These are important locations for affordable housing and are a key part of Beijing's efforts to decrease population density in the urban core.
New subway lines running through established commercial areas will increase property values for adjacent developments and also enable more convenient commuting for workers.
The Games has a clear “green” emphasis and this is increasing awareness of the need for a healthy environment. Green or sustainable office buildings are emerging in Beijing, and residential communities are also beginning to integrate sustainability features.
“Importantly, for individual residential buyers, the strongest selling point for sustainable buildings is likely to be the positive impact of a healthier internal environment as opposed to energy savings. Should utility costs increase in the future, however, energy savings will become a much more important differentiator,” Christensen said. (Xinhua)
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