A mixed-use site in Shanghai’s Xuhui district has been offered for sale with an estimated price tag of more than RMB 30 billion ($4.3 billion), as the municipal government strives to build a 1.8 million square metre (19.4 million square foot) financial hub along the Huangpu River.
The 323,665 square metre site, made up of 28 land parcels between the river’s west bank and Longhua Middle Road, was listed on the Shanghai Land Market last month, according to an announcement on the bureau’s website. The reserve price for the land sale remains confidential, but bidders are required to pay a security deposit of RMB 6.5 billion ($928 million). Given that the deposit is generally 20 percent of the total reserve price in Shanghai, the site is expected to fetch up to RMB 32.5 billion ($4.6 billion).
The development, which amounts to more than double the amount of grade A office space in Hong Kong’s Central district, is of a size and scale seldom seen — even in Shanghai. The project invites comparison to the Lujiazui financial centre in Pudong district, six kilometres to the northeast of the site, as well as the 1.2 million square metre Greenland Bund Centre complex under construction in the city’s South Bund area.
Creating a New Financial District
Interested parties can apply to bid on the site by January 16, and the list of companies qualified to proceed into the tender process will be announced three days later. The final date for the tender’s conclusion has not yet been announced.
Located near the Xietu Road residential area in the southern part of Xuhui district, the site is bounded by Ruining Road to the east, Ruining Road and Longteng Avenue to the south, Dongan Road to the west, and Longhua Middle Road to the north.
The government’s positioning of the site and the terms of the land sale call for developing the built environment for a world-class finance community that will attract the headquarters of financial firms and global investment institutions. The local authorities also seek to gear the project towards creating a home for venture capital firms investing in the technology and culture sectors.
Commercial space is expected to take up around 78 percent of the development’s above-ground gross floor area, which will total nearly 1.1 million square metres. An additional 710,000 square metres is earmarked for underground space, including 60,000 square metres of commercial floor area.
According to government documents, the site is zoned for 650,000 square metres of offices and 210,000 square metres of retail space, along with another 40,600 square metres ear-marked for cultural and sports facilities. The residential component total 200,100 square metres, 153,000 square metres of which must be developed into at least 1,187 units of long-term rental housing, including construction of an affordable housing component.
Property consultancy Savills observed that the land sale conditions for the commercial component of the project allow for development of grade A office buildings, retail and hotel space, while noting that the size of the project may influence its eventual sale.
Mega-Project May Require Team Effort
“Normally, new land plots tend to be very small in core districts, as most areas have already been built,” Chester Zhang, a director with the research team at Savills China, told Mingtiandi. “It is very rare to see land of such a scale coming onto the market, not to mention in a single sale.”
The terms of the land use rights call for the buyer of the site to hold 100 percent of the project’s retail, cultural/sport, and for-lease residential real estate, as well as retaining 60 percent of the office area. Under the conditions of the tender, all 28 parcels will be transferred as a single batch.
“This puts significant pressure on the developer’s operating ability and financial liquidity,” Zhang said of the land tender. “The massive development can be too challenging for a single developer, and joint ventures or consortia will be a better way to take on the project.”
The property is poised to benefit from its location within the Xuhui Riverside neighborhood, a key commercial area targeted for development by the Shanghai government. The site is located near the Middle Longhua Road metro station, offering access to the city’s Middle Huaihui Road, Jing’an Temple and Expo areas via lines 7 and 12.
The swath of land is also bordered to the northwest and northeast by Greenland Group’s Shanghai Greenland Center, Yingtong Greenland Building, and Greenland Marriott Hotel. Other top developers active in the area include China Vanke, Sunac China, CIFI Holdings and China Poly Group.
Xuhui Riverside Area Gains Ground
“Ever since the 2010 Expo, urban renewal in Xuhui Riverside has helped the area gradually create a livable environment surrounded by cultural and art venues,” said Zhang. “With the development of Huangpu Riverfront, Xuhui District has enacted waterfront protective development policies which have boosted the value of the site.”
Further along the Huangpu River toward central Shanghai is the Greenland Bund Centre project, a RMB 100 billion ($14.66 billion) mixed-use complex being developed by Greenland Group along Zhongshan Road, near where it intersects Dongjiadu Road.
In February of last year Greenland paid RMB 12 billion ($1.77 billion) to acquire a 50 percent stake in the Bund Centre project, then called Dongjiadu Financial City, from China Minsheng Investment Group (CMIG). The tallest towers in that riverfront complex are now close to being topped out, and Greenland has already found buyers for five of the seven smaller office buildings in the Bund Centre development.