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Neighbourhood Watch
There’s more to Shenzhen than cheap tailors, pirate DVDs and theme parks
| Text : Elizabeth Kerr | Photo : www.thinkstockphotos.com |
Shenzhen has been called a lot of things over the past few years. “Tacky,” “bizarre,” “frustrating,” and “exhausting” are just a few — and all are accurate in many ways. Shenzhen has slowly transformed from a sleepy, industrial Hong Kong suburb into a thriving city in its own right. Nestled in what is referred to as the Pearl River Delta, Shenzhen is often considered a second-tier city despite its GDP and per capita disposable income ranking it with China’s most developed urban centres.
Originally planned as a Special Economic Zone, direct foreign investment took off in the 1970s and the boom began. In the time since, Shenzhen has become a weekend playground for Hongkongers looking for a frugal day out, and an almost integral part of any four- or five-day jaunt for overseas tourists (along with Macau). Most go to see if the faux-Interlaken resort is for real and to determine if the mythic Windows of the World and Minsk World amusement parks are as wacky as they sound. But the city of nearly four million has transcended simply kitsch. The Shenzhen Stock Exchange is one of Asia’s most active, its container port ranks third behind only Shanghai and Hong Kong for volume, and it’s now home to the world’s biggest golf course (Mission Hills) and a raft of five-star International hotels, including the Hyatt, Ritz-Carlton, InterContinental, Shangri- La, and several boutique properties.
On the heels of increased non-manufacturing business in Shenzhen over the last few years, the property market has seen a fairly drastic shift in focus. But regardless of who’s moving in and why, a few constants remain: Lowu, Futian and Houhai remain the city’s premier regions for prime office and retail space and luxury residences. There are, however, a few new faces on the block, like the Mangrove area, a stretch of luxury residences along the north shore of Deep Bay, Liantang and the outlying Dameisha. It helps that much of these area are connected or partly connected by the relatively new MTR, whose kinks have been mostly worked out.
Office rentals and sales continue to grow to the tune of 3.5 percent and 2.7 percent respectively from second to third quarter in 2010 according to research by CB Richard Ellis Greater China. The stats cited in CBRE’s MarketView put Shenzhen’s growth in the upper echelon of the Mainland office market, along with Guangzhou, Chengdu and Beijing. Rents are sitting at approximately RMB275 per square metre, second only to Shanghai. “Prime property sectors continued to be underpinned by upbeat demand in Guangzhou and Shenzhen over the third quarter. Both cities observed moderate rental growths for the overall office markets and a better-than-average performance of Grade-A premises. Each market was supplied by a moderate completions stream slightly more than 125,000 square metres, which reported acceptable pre-commitment rates prior to the handover,” stated CBRE’s MarketView. Chinese financial institutions and multi-nationals were the primary sources of demand and the vacancy rate remained steady.
On the retail side, seemingly Shenzhen’s bread and butter if an average Sunday afternoon in its main shopping quarters is anything to go by, the city’s retail rents hover in the middle of the pack vis-a-vis China but have shot up 5.5 percent quarter on quarter, the highest in the Mainland. Logistics rents are also rising in the major shipping centre. “Prime retail rent in Shenzhen increased 5.5 percent (ground floor) thanks to rental surges in a couple of new malls, which increased quotations on the back of high occupancy and an uptrend of demand.” Lowu’s prime retail stock is expected to rise in the near future when KK Mall, the shopping component of the Kingkey Financial Centre, finally opens. KK Mall will add 80,000 square metres of retail space to the district.
Not surprisingly, luxury residential rents and prices are creeping up too, with rents rising 0.8 percent to around RMB70 per square metre, and sales up 2.9 percent to just under RMB40,000 per square metre. Across southern China CBRE pointed out Guangzhou’s market uncertainties stemming from cooling policies, but that’s not the case in Shenzhen. “The Shenzhen market witnessed a sudden spring-back in primary sales in the quarter, with prices of apartments and villas climbing back at temperate paces. In leasing sectors, demand for serviced apartments was driven up by inflows of expatriates. Prime logistics premises were sought-after by enterprises from the manufacturing sectors, with rentals being further driven up.” And with all those banks and foreign organisations opening offices, serviced flat rents, “achieved an even sharper growth of 5 percent, driven by robust demand.”
Shenzhen has worked hard to shed its experimental backwater image, and increasing numbers of global companies and overseas staff seem to bear out the success of that attempt. But unlike Hong Kong, which is all business, or Macau, which is all play, Shenzhen has also managed to balance its quirks with its economy. There aren’t many places in the world that boast luxury flats as wise rental investments and an allsinging, all-dancing Russian aircraft carrier crew as entertainment.
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