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Higher costs force firms to look elsewhere
By Dai Yan (China Daily)
Updated: 2005-07-28 06:13
SHANGHAI: The high land and labour costs of China's key cities are forcing
multinational companies (MNCs) to move their industrial facilities to
second-tier areas. Shanghai, Beijing and Guangzhou should rethink their role,
said Jones Lang LaSalle, the world's leading real estate consulting firm.
In Shanghai yesterday, the company released its new China Industrial Guide
that validates the movement of industrial sites to second tier cities. The guide
gives executives in the property market an oversight to the rapidly changing
industrial market in China.
"Our clients have noted the increasing cost of labour and land in Beijing,
Shanghai and to some extent, Guangzhou. This means that industrial investment
will be pushed further inland. In the Yangtze River Delta area, this means going
beyond Suzhou to Hefei, Nanjing and Wuxi," noted Hart, head of research at Jones
Lang LaSalle China.
"This is true for the other key areas as well, we see a potential trend among
MNCs to consolidate their industrial resources in China, which presents both
opportunities and challenges for China's young yet vibrant industrial real
estate (market)," he said.
In addition to providing a thorough overview of China's industrial property
landscape, the industrial guide also focuses on six major economic regions,
namely the Greater Bohai Bay, the Greater Yangtze River Delta, Southern China,
Western China, North-eastern China and Central China.
Among the six major economic regions, the Greater Bohai Bay Area, the Greater
Yangtze River Delta Area and Southern China are the industrial hubs that
continue to power China's robust economic growth. Together, these three regions
contribute more than half of the national GDP with only 34 per cent of the
population and 10 per cent of China's land total.
However, the cost of doing business in these regions is relatively high. The
recent more favourable investment policies, adopted by the central and local
governments pertaining to investing in northeastern and western China, have
resulted in attracting significant foreign investments.
The level of overseas investment in China has grown dramatically in recent
years, with actual foreign direct investment topping US$60 billion in 2004. A
significant component of this investment has been in the establishment of
factories, warehouses and research & development (R&D) centres.
Kenny Ho, Senior Manager of at Jones Lang LaSalle China said the industrial
land price in key cities is 30-40 per cent more than that of the second-tier
cities in China.
It is difficult to find good quality industrial space close to Shanghai due
to supply constraints and high land, utility & labour costs. As with other
areas, the central government's tightening of industrial land supply in 2004 has
added to the supply constraints, the Guide said.
As the industrial facilities move inland, the leading cities need to develop
and grow into strong bases for MNCs' regional headquarters and provide centres
for R&D facilities, Ho said.
The major industrial cities including Beijing, Shanghai and Guangzhou will
still be the choice destinations for more sophisticated manufacturing, including
some aerospace and pharmaceutical operations, the guide said.
Jones Lang LaSalle's Guide also provides China's more than 4,500 industrial
parks with an overall picture of the lay of industrial land, thereby helping
them to find advantageous footholds.
Ho said whilst MNCs are finding locations for industrial facilities outside
the main cities in China, second-tier cities are also facing competition from
foreign cities, such as those in Brazil and India.
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