Grand Wuxi Gateway and Dalian Plaza 77?

This post may stray a bit from our usual focus on industrial property and media ventures, but there have been two stories this week of Hang Lung Properties (HLPPY), the developer behind some of Shanghai’s best known and most successful commercial developments making major acquisitions in second and third tier Chinese cities.

The South China Morning Post reported recently that Hang Lung Properties paid 415 million yuan (HK$471mn) for an existing retail site in Wuxi, Jiangsu province, its second acquisition in a week.  This follows the company’s acquisition on May 10th of a piece of undeveloped land for RMB 1.2 billion in Dalian, Liaoning Province.

The Wuxi project is expected to involve a total investment of RMB 2 billion to expand and complete an existing but unfinished retail site.  For those of us living in Shanghai, Hang Lung is well known as the developer of Plaza 66, a premier office and retail complex, as well as the Grand Gateway development in Xujiahui.

Hang Lung also owns properties in Shanghai, Tianjin, Shenyang, Wuxi and Ji’nan.

Although our focus at RightSite is on serving China’s industrial property community and these are commercial project, these developments show the growing recognition of the market potential of China’s second and third-tier cities.  While centres like Shanghai and Beijing are already becoming prohibitively expensive, there are still very affordable sites available in cities like Wuxi and Dalian, where growth rates are likely to be much higher than in Shanghai in the coming years.

Much of this growth is driven by the development in industrial zones (RightSite has listings for 11 industrial zones in Wuxi alone), as well as the continuing improvements in infrastructure in provinces like Jiangsu and Shandong. When developers like Hang Lung, who have a very successful record in China, start making major acquisitions like this, many industry analysts see signs of a market recovery.