New World Development recently began work on its second K11 commercial project in Shanghai, breaking ground on a 17,171 square metre (184,827 square foot) site in the heart of the Middle Huaihai Road shopping district, according to a company press release.
“Following the establishment of mainland China’s first K11 Art Mall in Shanghai in 2013, we are pleased that K11 is setting foot in this city once again,” said Adrian Cheng, chief executive of New World Development and founder of the K11 group. “This iconic cultural-retail landmark on Middle Huaihai Road will mark another milestone in K11’s strategic development in Eastern China and beyond.”
In an uncontested land auction last year, the top-10 Hong Kong developer purchased the site bordering Huaihai Park for RMB 4.1 billion (then $590 million), adding to the company portfolio another project in Shanghai’s Huaihai Zhong Lu after its launch of the K11 Art Mall in 2013.
New World continues its Shanghai expansion as tenants have shown renewed willingness to lease commercial space in the city’s business hubs and as vacancy rates decline. In the second quarter of 2021, citywide office vacancy fell by 1.3 percentage points to 14.5 percent, and shopping mall vacancy by 0.4 percentage points to 9.2 percent, Savills reported.
Huaihai Zhong Lu Makeover
With its site approved for development of up to 128,683 square metres of space, New World aims to build a centre for art, business and nature, featuring a garden plaza, “vertical greenery” and courtyard.
Located in Shanghai’s prime commercial district near Shui On Land’s Xintiandi and Hong Kong Plaza, the second K11 project in China’s commercial capital is expected to become an upscale “cultural-retail” complex only a 200 metre distance away from the K11 Art Mall Shanghai.
New World’s design-conscious CEO has engaged high-profile Danish architecture firm Bjarke Ingels Group to give shape to the project, which is located behind a renovated historical building on Huaihai Road housing boutiques by luxury brand Hermes and its local brand Shang Xia.
The New World project, which stretches south to Taicang Road, is kicking off amid ongoing plans to reinforce Huaihai Zhong Lu as one of the city’s key commercial zones, as announced by the Shanghai Municipal People’s Government last year. Huangpu District, where Huaihai Zhong Lu is located, has launched a renovation programme for businesses and infrastructure, aiming to develop the commercial circle around the road into a “business block with global influence” by 2025.
The K11 expansion in Shanghai begins as the city’s office take-up surges to a three-year high, with tenants signing leases for 410,900 square metres in the second quarter of 2021, according to a recent Savills report. A noteworthy transaction during the period from April to June was Sina News, a division of NASDAQ-listed Sina Corp, leasing 5,000 square metres in Fosun’s Bund Finance Center, which is also in Huangpu district.
The brokerage report also noted that Huaihai Zhong Lu remained Shanghai’s third most expensive business district in the second quarter, with office rents averaging RMB 9.2 per square metre per day.
While the introduction of four new retail projects during the period boosted available supply, 80 percent of retail precincts recorded an increase in occupancy rates. Shopping mall vacancy dropped by 0.4 percentage points to 9.2 percent within the quarter, and by 2.5 percentage points year-on-year.
Apart from its second development project in Shanghai, which began at the end of July, K11 has launched two new mainland commercial projects this year: the K11 Art Mall I in Wuhan and K11 Select in Tianjin.
According to New World’s most recent interim report, the company’s K11 division expects to establish a footprint of more than 2.8 million square metres in gross floor area of projects across 10 cities in Greater China by the end of 2025.
The expansion plan for its commercial empire may distract from recent troubles with New World’s residential projects, with the developer having suffered an $850 million slide in value last month when several stories of the company’s Pavilia Farm complex atop Tai Wai MTR station in Hong Kong had to be torn down after being built with the wrong grade of concrete.
K11’s Shanghai projects will join two more New World developments in the Yangtze Delta region in Ningbo and Hangzhou, as the company continues to expand in the city and beyond.