Three of Hong Kong’s biggest developers are said to have made it to the final round of a competition for a rare site in Shanghai’s Jing’an district in a land auction set to end this week.
Sun Hung Kai Properties, Hang Lung Properties and Swire Properties – together with an unnamed partner – submitted the only three qualified bids for an 89,000 square metre commercial project along the city’s Shimen Yi Lu, according local press reports. An announcement last week by the Shanghai Bureau of Planning and Natural Resources confirmed that three parties were still in the running for the site.
The three contestants will have to have agreed to pay at least the auction minimum of RMB 4.71 billion for the 9,375 square metre site, which will be awarded to the highest bidder when the auction concludes on January 24th.
Competing for a Rare Jing’An Prize
The prize that the finalists are fighting for is officially known as Jing’an District Nanxi Community C050401 Unit 115-12, and is located just across Shimen Yi Lu from HKRI Taikoo Hui, which Swire co-developed with its hometown partner, Hong Kong Resorts International.
The project just south of Jing’an’s major commercial thoroughfare along West Nanjing Lu is approved for construction of a 180 metre tall office building complemented by an underground retail center within Shanghai’s inner ring road, and if sold for the auction minimum would fetch a value of RMB 53,000 per square metre of above ground gross floor area.
According to data from the research team at Savills in Shanghai, the plot is the first significant commercial site to go on sale in the core sector of Jing’an district since Houston-based developer Hines purchased the site on Xinzha Road which is now One Museum Place for more than RMB 3.7 billion in August of 2013.
The project will connect below ground to metro lines 12 and 13 at the West Nanjing Lu station, and also has access to Line 2 at the same station. Completed office projects in the vicinity are currently charging average achievable effective rents of between RMB 9 to RMB 12 per square metre per day for mid-zone floors, excluding management fees, according to Savills research.
Hong Kong Developers Learn to Love Shanghai
All three of the Hong Kong finalists said to be competing for the Shimen Yi Lu site are well familiar with Shanghai’s commercial real estate market from earlier projects in the city.
Swire Properties officially opened its 322,000 square metre HKRI Taikoo Hui project across the road in late 2017 and already has leased out all but a small amount of 170,000 square metres of office space in that project’s twin towers. Last year the company made an unsuccessful bid for a 78,256 square metre site near Xintiandi that was acquired at auction by a joint venture between Shui On Land, China Pacific Insurance and Shanghai Yongye Group for RMB 13.6 billion.
Hang Lung, headed by tireless market commentator Ronny Chan, scored its biggest mainland commercial victory with Plaza 66 a commercial project just a few blocks up West Nanjing Lu from the new site which began opening in 2001.
Sun Hung Kai, which consistently ranks as one of Hong Kong’s largest developers, has multiple projects around Shanghai, including the IFC commercial complex in Pudong’s Lujiazui area, the ICC office tower and iAPM mall on Xuhui district’s Huaihai Lu and the one million square metre International Trade City (ITC) project scheduled to open in the city’s Xujiahui area in 2022.
Jing’an Among City’s Most Sought-After Districts
The commercial concentration and relative scarcity of land in downtown Shanghai makes Jing’an one of the most coveted districts in the city among real estate developers, particularly for plots within the first ring road. In August 2016, little-known Fujian developer Ronshine China beat out 17 rival bidders to win a residential site on Zhongxing Road for RMB 11 billion ($1.66 billion).
That purchase of a site in what had formerly been the city’s Zhabei district, worked out to RMB 100,000 per square metre — the highest price ever for land in Shanghai at the time. The Zhongxing Road site, which sits near a metro station just 3.3 kilometres from People’s Square was the first residential land to be sold within Shanghai’s first ring road since 2004.
Last December, China’s fourth largest real estate developer Sunac China Holdings also won a housing plot in Jing’an for RMB 3.05 billion, however, that site, also part of what had been Zhabei until it merged with Jing’an in 2015, is situated close to the Middle Ring road well north of the city’s urban core.