Dubbed “Manhattan of the Pearl River Delta”, Qianhai, a 15 square kilometer coastal strip in Nanshan district, has been largely perceived to be the next CBD in Shenzhen. Based on the overall development plan approved by the State Council in 2010 and later included in China’s 12th Five-Year Plan in 2011, “Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone” (Qianhai), is set to be developed into a modern financial hub in southern China and a gateway for cross-border investment by 2020, with a target GDP of RMB 150 billion by then.
Qianhai will have a total developable floor area of 26 million square meters, including 12 million square meters for office use, 3.6 million square meters for commercial use and 6.5 million for residential use. To attract high-end foreign companies setting up offices in the district, the Government plans to mimic the low tax rate environment in Hong Kong by reducing both the corporate and salary tax rates to below 20%, compared to 25% in the Mainland.
Over 70 companies from Fortune 500 have showed interest to set up offices in the district and 236 companies have registered in Qianhai. Some of the largest banks and financial companies such as HSBC, Hang Seng Bank, Value Partners, Sun Hung Kai Financial and Sumitomo Mitsui Banking Corporation have already signed agreement of interest to invest RMB 220 billion in the district.
With more companies jumping into the market, there will be a huge demand for office space in Qianhai. To ensure the area will be replenished with skyscrapers, the Government grants a higher-than-expected plot ratio at nearly nine times to three commercial land plots which will be listed for sale later this year. The three commercial sites have a total upset price of nearly RMB 15 billion and a developable floor area of 1.27 million square meters, translating into an average land cost of at least RMB 10,000 per square meter. The Government also requires winners to invest at least RMB 15,000 per square meter for development. Factoring in the land cost, construction cost and a normal profit margin of 30 percent for developers, future office units built on the sites will be selling for at least RMB 33,000 per square meter.
Apart from the heating commercial land market in the district, the residential property market near Qianhai is also viewed as an opportunity for investors. According to the Government’s estimate, the district plans to accumulate 150,000 international financial professionals and 100,000 professionals in other modern service industries. The expected strong housing demand from high-income expats has already driven up the asking prices of some new homes in Qianhai to nearly RMB 35,000 per square meters – near a double of the average price of RMB 19,000 per square meter in Shenzhen.