Chongqing Office and Retail Market Overview Q4 2017
Macro Overview 2
Chongqing Economic Overview Economic Indicators Chongqing Xiamen Chengdu Shenzhen Population (ten thousand, 2016) 3,048 392 1,466 1,191 City Area (sq km) 82,400 1,699 12,121 1,997 GDP (RMB100 million, Jan Sep. 2017) Value-added of Tertiary Industry (RMB100 million, Jan Sep. 2017) 14,309.18 2,961.62 9,725.40 15,408.62 7,041.03 1,693.03 5,214.50 9,433.91 Unemployment Rate (2016) 3.7% 3.4% 3.3% 2.3% Total Retail Sales (RMB100 million, Jan Sep. 2017) Per Capita Disposable Income of Urban Residents* (RMB, Jan Sep. 2017) Consumer Price Index (Jan Sep. 2017) Real Estate Development Investment (RMB100 million, Jan Sep. 2017) Real Estate Completions (million sq m, Jan Sep. 2017) 5,856.58 1,065.54 4,647.60 4,342.80 24,834 38,837 29,343 40,930.32 100.8 101.9 102.3 101.3 2,880.42 657.03 1,982.40 1,554.32 25.76 2.20 12.04 2.31 *Per capita disposable income is calculated as total income with relevant taxes and compulsory social security deducted. Some data are not officially released. Source: City Bureau of Statistics, research
Chongqing Economic Overview Major Land Transactions Land Number Purchaser Date Use District Land Area (sq m) Price (RMB million) Plot Ratio Unit Price (RMB/sq m) Xiyong Group, Shapingba District L (Partial) Wanda Q4 2017 Office, Retail Shanpingba 276,803 376.46 0.4 3,778 Xiyong Group, Shapingba District, L74-1/01,L74-2/01, L75-2/02, L75-4/02, L79-5/02 Wanda Q4 2017 Office, Retail Shanpingba 280,435 475.67 0.7 2,324 Yulai Group, Liangjiang New Area, C53/05 Ningbo Chuangtou Rongan Q4 2017 Office, Retail, Residential Yubei 19,222 179.42 1.1 8,485 Lijiatuo Group, Banan District, G25-1/03, G26-1/03, G2-1/04 Beijing Huayuan Q4 2017 Residential Banan 136,794 2,090 2.5 6,026 Dayangshi Group, Jiulongpo District, R18-9-1/04 Excellence Group Q4 2017 Office, Retail, Residential Jiulongpo 12,793 446 3.5 9,961 Lianglu Group, Yubei District,F110-5, F111-4, F113-1, F113-2 Vanke, Yufu, HNA Group Q4 2017 Office, Retail, Residential Yubei 78,686 1,385.05 3.9 4,482 Lianglu Group, Yubei District,F108-3, F109-1, F112-1, F125-1, F126-1, F127-1, F128-1, F24-1 Longfor, Shenzhen New Alliance Q4 2017 Office, Retail, Residential Yubei 218,505 3,139.26 3.4 4,230 Source: Chongqing Municipal Bureau of Land and Resources research
Chongqing Macro Overview Major Office and Retail En-bloc Transactions Property Name Property Type Transaction Type Transaction GFA (sq m) Transaction Date Seller Buyer Total Value (RMB million) Unit Price (RMB/sq m) Chongqing Hong Leong City Garden Residential Equity Deal 170,000 Q4 2017 City Development Limited Vanke N/A N/A Eling Feng Residential Equity Deal 35,510 Q4 2017 City Development Limited Vanke N/A N/A Shenxin Dasha Office Equity Deal 9,332 Q4 2017 Panlong Xincheng Residential Asset 123,366 Q3 2017 Sincere King Limited China National Petroleum Corporation Jinke Hotel Hotel Equity Deal 38,000 Q3 2017 Jinke Group Chongqing Wanda Cultural Tourism City Farebase 73.79 7,906 COFCO Property (Group) Co., Ltd. Weinan Hongjing Trade Co., Ltd. 4.49 3,640 358.56 9,436 Theme Park Equity Deal 5,500,000 Q3 2017 Wanda Sunac N/A N/A Source: research 5
Chongqing Grade A Office Market 6
Chongqing Grade A Office Submarket Highlights Average Rental: RMB93.6 Vacancy Rate: 60.9% Yubei Average Rental: RMB92.0 Vacancy Rate: 54.0% Jiangbei Average Rental: RMB83.4 Vacancy Rate: 33.7% 高新区 Average Rental: RMB90.0 Vacancy Rate: 45.0% Nanan Yuzhong Jiulongpo Average Rental: RMB62.0 Vacancy Rate: 20.0% Note: Average rental (RMB/sq m/mo) refers to face rent based on GFA Source: Based on Google Site Solution II report 7 research
Chongqing Grade A Office Market Dynamics sq m 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 2011 2012 2013 2014 2015 2016 2017 Annual Supply, Net Absorption and Vacancy Rate 60% 50% 40% 30% 20% 10% 0% No new supply was added in Q4. Chongqing s Grade A office stock remained at more than 1.85 million sq m for the quarter. Robust leasing activity helped the market record net absorption of 89,000 sq m in Q4, down 5.7% q-o-q by comparison. But on an annual basis Chongqing set a record high with net absorption amounting to 247,000 sq m in 2017 on strong demand despite a large volume of new supply. The vacancy rate dropped to 44.8% in Q4, returning to end-of-2016 levels. New Supply Net Absorption Vacancy Rate Major Leasing Transactions Building Submarket Tenant Area (sq m) Chongqing IFS T1 Jiangbei Xinda Ruitong 800 Chongqing IFS T5 Guohua Financial Center Pinan International Finance Center Jiangbei Jiangbei China Creation Group 2,000 Keyence 350 Asialnfo 2,000 Hengfeng Bank 1,000 Yuzhong China Taiping 4,000 The financial sector was the key source of occupier demand in Q4. Large-scale leases were taken out by China Creation Group, Hengfeng Bank and China Taiping. Chongqing s co-working sector is growing as the city continues to become more well known on the global stage and attract investment from domestic and foreign sources. Already, the market comprises operators Cybernaut, Knight Island, Regus and TEC Business Center to date. In addition, SOHO reportedly plans to enter the city s co-working space. Source: research 8
Chongqing Grade A Office Market Dynamics 85 80 75 70 2011 2012 2013 2014 2015 2016 2017 Average Rental Rental RMB/sq m/mo Average rent for Grade A offices fell to RMB87.6 per sq m per month 100 in Q4, down 1.3% q-o-q and 3.1% y-o-y. Despite recording solid 95 leasing activity in Q4, the market was unable to absorb the historically large volume of new supply. Landlords also contend with 90 fierce competition and a high vacancy rate north of 40%. By submarket, Jiangbei District on the whole boasts the most quality office stock. Receiving the largest volume of new supply for the year among submarkets and with vacancy rates above 50% as of the end of Q4, rent levels are increasingly competitive and dropped 2.5% q-oq on average to RMB92 per sq m per month for Q4. In the Yubei submarket, amid a high vacancy rate citywide, average rent remained flat at RMB93.6 per sq m per month in Q4. sq m 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 Year-end Stock and Forecast Pre-leasing is underway at a number of completed projects, including Tianhe International, and Zhongyu International Center. Ahead to 2018, the market is likely to face downward pressure on rent as the vacancy rate is expected to remain high due to the large volume of supply in the pipeline. But potential delays in the completion of some projects and changes in the use of land properties may provide some relief. Yuzhong Jiangbei Nanan Yubei Jiulongpo Note: *forecasted Source: research 9
Chongqing Office Future Supply (2018 2022) sq m 900,000 800,000 700,000 Yueyang Project 600,000 500,000 400,000 300,000 200,000 100,000 0 Zhongyu International Center Tianhe International Junhao ICFC Shui On Land No. 3, No. 6 China Resources City Crossing Phase II Sincere Center Phase II Raffles City Plaza - Longxin Center Shui On Land No.1 Forte Project Marriott Phase 2 Xiehe Project Sun Moon Light 2018 2019 2020 2021 2022 Jiangbei Nanan Yubei Jiulongpo Yuzhong Note: No new supply for 2021 Source: research
Chongqing Prime Retail Market 11
Chongqing Prime Retail Market Submarket Highlights Yubei Average Rental: RMB967 Occupancy Rate: 95.2% Average Rental: RMB400 Occupancy Rate: 93.2% Average Rental: RMB460 Occupancy Rate: 97.1% Average Rental: RMB891 Occupancy Rate: 84.0% Jiangbei Yuzhong 金鸡湖 Shapingba Average Rental: RMB800 Occupancy Rate: 95.0% Jiulongpo Nanan Average Rental: RMB383 Occupancy Rate: 85.1% Banan Average Rental: RMB300 Occupancy Rate: 96.6% Note: Average Rental refers to the approximate average first floor asking rent in RMB for prime retail property, per square metre, on net floor area, per month basis. Source: Google Maps from SiteSolution II, research 12
Chongqing Prime Retail Market Market Dynamics sq m 800,000 600,000 400,000 200,000 0 2013 2014 2015 2016 2017 New Supply Net Absorption Occupancy Rate Annual Supply, Net Absorption and Occupancy Rate 95% 90% 85% In Q4, Zeke Mall in Nan an District opened, adding 100,000 sq m of new retail supply. Chongqing s prime retail stock finished at 3.85 million sq m at year s end. In Q4, the vacancy dropped 2.4 percentage points to 10% y-o-y due to robust leasing activity. The vacancy rate in Jiangbei District decreased 1.6 percentage points y-o-y to 4.8% in Q4 following completion of brand remixes at a number of shopping malls. On the other hand, malls in Yuzhong District continued to undergo adjustments, and this was reflected in the vacancy rate increasing 1.6 percentage points y-oy to 16.0% at quarter s end. Major Store Openings Building Submarket Tenant Area (sq m) Longfor Northern City Paradise Walk PARK108 Guotai City Plaza Zeke Mall Jiangbei Yacui Restaurant 350 Victoria s Secret 2,000 Yuzhong MUJI 800 Nanan GOME 3,280 UME 4,000 Notable new store openings for the quarter included Victoria s Secret s Whole Category store at Longfor Northern City Paradise Walk, its third such location in mainland China. Elsewhere, Marc O Polo settled into MIXC, while Zeke Mall added UME and GOME. MUJI opened a 800 sq m store in the newly rebranded PARK108 Guotai City Plaza (formerly known as Chongqing Guotai Plaza following a brand mix adjustment encouraged by the Yuzhong district government in order to stimulate consumption spending). Source: research 13
Chongqing Prime Retail Market Market Dynamics Rental RMB/sq m/mo 780 760 740 720 700 680 660 2013 2014 2015 2016 2017 In Q4, average rent remained flat at RMB702 per sq m per month impacted by adjustments made in some shopping centers and completion of new shopping centers in emerging retail areas that generally have relatively lower rent levels on offer. Average Rental Year-end Stock and Forecast sq m 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 2012 2013 2014 2015 2016 2017 2018* 2019* 2020* 2021* 2022* Yuzhong Jiangbei Nanan Shapingba Jiulongpo Yubei Banan Dadukou Note: *forecasted As city transportation networks improve, emerging subcommercial areas have continued to spring up over the past year. These include Nanbing Road and Danzishi in Nan an District, Jiazhou and Xinpaifang in Yubei District and Jiangbeizui in Jiangbei District. This year, COFCO Group, Future Land, Longfor Real estate as well as KWG Property all have purchased land parcels in Central Park. Amid the land-use purposes for this area, 2 million sq m of commercial retail property is planned for Chongqing s future Central Park area, which upon build-out is anticipated to become a new major business district. Source: research 14
Chongqing Prime Retail Market Future Supply (2018 2022) sq m 900,000 800,000 Zodi Grand Group China Resources MIXC 700,000 600,000 BRC Central Square Jinke Times Square Kaisa Binjiang Metro Shopping Plaza 500,000 Liangjiang Chuncheng Shopping Mall Longfor Liangjiang Xinchen 400,000 300,000 HongKong Land Yorkshire Commercial Project Xinhua Fashion Project Longxing Center 200,000 100,000 0 China Resource Mixc Junhao ICFC Sincere Center Phase II Raffles City Project Yingli ICC Shopping Mall Longxin Lianglukou Project Marriot Plaza 2018 2019 2020 2021 2022 Yuzhong Jiangbei Nanan Yubei Daduko Jiulongpo Note: No new supply for 2021 Source: research 15
Business Contacts Jiang Bing-he General Manager, Chongqing binghe.jiang@cushwake.com Zhang Xiao-duan Head of South & West China Research xiaoduan.zhang@cushwake.com Cheng Jia-long Managing Director, South & West China jialong.cheng@cushwake.com James Shepherd Managing Director, Research, Greater China james.shepherd@cushwake.com 39/F, HNA Poly International Center 235 Minsheng Road, Yuzhong District Chongqing 4000100 China Tel: +86 23 6383 8405 www.cushmanwakefield.cn WeChat ID: DTZ_China Disclaimer This report has been produced by for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and shall not be liable to any reader of this report or any third party in any way whatsoever. shall not be held responsible for and shall be released and held harmless from any decision made together with any risks associated with such decision in reliance upon any expression of opinion in the report. Our prior written consent is required before this report can be reproduced in whole or in part. 2018 All rights reserved.