Posted:2007-3-19|Source:China Daily|No. of Views:
Tianjin, Chengdu, Chongqing, Shenyang, Hangzhou, Wuhan all are highlighted on the expansion map for today's property developers and real estate service companies.
The development route taken may differ a bit between companies, but the view is the same due to the government's commitment to cool down the overheated property sector, so-called second-tier cities offer more potential and comparatively lower risks.
According to Fan Xiaochong, vice-general manger of Sunshine 100 Co Ltd, metropolises like Beijing, Shanghai, Guangzhou and Shenzhen have now hit an urbanization level of 75 percent thanks to skyrocketing economic development.
As a result, city dwellers' demands are shifting from satisfying their own need for housing to property improvement, investment or even speculation.
Yet grasping a piece of land in Beijing or Shanghai is becoming more and more difficult.
"Compared with Beijing, the means to acquire land in Tianjin is more transparent and efficient," says Pan Shiyi, president of SOHO China, a leading Beijing-based property company which has plans to go to Tianjin.
The economy's continuing advancement has also accelerated the urbanization process in second-tier cities, creating more open opportunities than those available in the country's biggest metro areas.
Less competition, more available land and preferential local government policies in those cities make them even more attractive.
So expanding into second-tier cities has become the choice for quite a number of property developers.
Wanke, the first to tap into second-tier cities, has now extended its business to more than 27 smaller cities.
Sunshine 100, a Beijing-based property developer and one of the earliest to venture outside the capital, has covered 18 cities across the country.
Foreign capital, though still mostly invested in major metropolises, is also finding its way to second-tier cities.
A report from International real estate service company DTZ shows that only about 7 percent of overseas capital was placed into second-tier city property since 2005, compared to 50 percent in Beijing and 42 percent in Shanghai. But that proportion is expected to rise sharply as more overseas investors eye opportunities in second-tier cities.
Simon Property Group, the largest publicly traded retail property group in the United States, made its debut investment in Hangzhou, the capital city of East China's Zhejiang Province, in July of 2005. It built a shopping mall together with Morgan Stanley and Shenzhen International Trust & Investment Co.
ProLogis, the world's largest publicly listed industrial real estate investment trust, has developed logistic centers in Tianjin and Suzhou. Australia's Mac-quarie Bank joined fray when it acquired nine large-scale shopping malls from Wanda Group.
Sources said WarburgPincus, a US-based private fund, has agreed to inject $45 million into Sunshine 100's project in Chengdu.
Hong Kong property developers are also wary of missing such business opportunities.
As early as 2004 Hutchision Whampoa was reportedly buying land in Chengdu, Xi'an and Wuhan. In 2005, Hang Lung Properties announced plans to shift its business focus from Shanghai to second-tier cities.
Yet how to adapt themselves to the local culture and meet local customer demands has turned out to be a challenge for property developers.
