Smart planning, lean operation and long-term ownership suggested as three core strategies
September 10, 2014, Beijing – A panel discussion on supertall buildings organized by CBRE took place recently inside Kerry Plaza Shenzhen. Dozens of top experts on commercial real estate from Guangzhou International Financial Center, major Shenzhen city developers and CBRE South China Office carried out in-depth discussions on the development of supertall buildings in China and the challenges facing such projects. The meeting resulted in three main strategies recommended for developers and owners: rational planning, lean operation and long-term ownership.
The Council on Tall Buildings and Urban Habitats (CTBUH) defines a supertall building as an architectural structure that is over 300 meters high. According to CBRE research report "The Emergence of Asian Supertalls", Asia is now home to 55% of the total number of tall office buildings globally. China dominates the development pipeline in the supertall building category over the next five years, with the country accounting for 71% of the total future supply of supertall office buildings to be completed during the period, and with its second-tier cities accounting for 51%.
"The flourishing of supertall buildings in China is a product of the country's economic development, and the trend is being driven by four major factors: local government policies, the rise of large and well-financed developers, land scarcity in central business hubs and the promise of high returns on investment," said Yicheng Wu, Senior Director, Asset Services, CBRE China. "However, looking at the national market as a whole, uptake for such properties is far less than the available supply, especially in second-tier and third-tier cities. This situation creates pressure and challenges for developers and owners of supertall projects."
Statistics compiled by CBRE reveal that supertall buildings do not necessarily command high rents. "For example, neither the supertall buildings in Shanghai nor the supertalls in Shenzhen have the highest office rents in their respective cities," said Sean Lim, Senior Director, Head of Landlord Services, CBRE China. “Location, office space characteristics and property management service are all crucially important. The most expensive office rentals are typically found in buildings that enjoy the advantages of a strong brand that has been built up over a period of at least ten years, and a seasoned team that is able to provide outstanding services to tenants."
Confirming these views was Eric Shi, Marketing Director of the Guangzhou International Financial Center and General Manager of Guangzhou Yuexiu Asset Management Ltd Mall and Office Building Department. Shi believes that in its early opening phase, GIFC sparked market interest because it was seen as a project that would bring more corporate headquarters to Guangzhou and thereby boost the entire city economy. The immediate success that the building achieved in its opening phase was therefore an example of supply driving demand.
"However, we had to continuously work to upgrade both our hardware and our software to keep up with the needs of our tenants," Shi said. " Putting together the strong teamwas a critical part of this. Only through these efforts were we able to become a leader among supertall buildings in Guangzhou and South China."
"Generating revenues through pre-opening sales is a typical strategy for developers of commercial real estate, but in the case of supertalls developers usually retain their ownership stake for a longer period and seek to earn high returns through the collection of tenant rents," said Coco Huang, Director of CBRE Consulting, Shenzhen. "The investment cycle will always be longer relative to that of an ordinary office building, and this needs to be taken into account during the early planning and design phases of the project." Huang also presented a few case studies of supertall buildings in China at the event.
Noting that management of supertall buildings is still a completely new field for China, Wu said, "Technology and talent are currently the two big challenges facing owners of these projects. There is still little accumulation of professional research and experience in the area. Moreover, buildings are being built more and more rapidly; it takes less than a year now to construct 100 meters of vertical building height, and this rate outpaces the ability to cultivate and train property management talents. At the same time, construction of supertall towers in the country is trending from the single office tower structures of the past to vertical mixed-use projects that put ever-higher demands on planners, managers and operators. Cultivating talent to manage supertall buildings will therefore be key for the successful operation and management of these properties in the future."
As the world leader in commercial real estate services and investment, CBRE has extensive experience in the planning, management and operation of supertall buildings, and has a profession service team dedicated to supertall projects. The company has provided consulting and representation services for supertall buildings in China and around the world. On September 16-19 in Shanghai, CBRE will proudly support The CTBUH 2014 Shanghai Summit where CBRE supertall building experts will be attending the conference and sharing their insights.
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| CBRE Dialogue | CBRE Dialogue Honored Guests |
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Yicheng Wu, Senior Director, Asset Services, CBRE China |
Sean Lim, Senior Director, Head of Landlord Services, CBRE China |
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Eric Shi, Marketing Director of the Guangzhou International Financial Center and General Manager of Guangzhou Yuexiu Asset Management Ltd Mall and Office Building Department |
Coco Huang, Director of CBRE Consulting, Shenzhen |
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
