The Shenzhen government late last month posted a public notice of its plans to sell a 181,000 square metre (1,948,267 square foot) site in the southern part of the city’s Nanshan district, that is expected to bring the local government at least RMB 3.59 billion ($520 million) in new revenue.
The land tender, which is scheduled to conclude late this month, gives a buyer who meets some stringent requirements put forth by the local government the opportunity to build a 185,000 square metre commercial development next to a pair of sites previously purchased by leading developers China Vanke and China Evergrande Real Estate in the technology hub.
The site is part of the Shenzhen Bay Super Headquarter Base, a master-planned economic development zone in Nanshan district, which aims to become the home of top tech firms and other corporates in the southern China mega-city. Nanshan, which borders Hong Kong, is already home to more than 8,000 technology firms, including such mainland heavyweights as Tencent, ZTE and financial software maker Kingdee.
Selling a Site With Strings Attached
The land sale, which was announced on the website of the Shenzhen Land and Real Estate Exchange Centre, makes available the site, which has been approved for construction of a maximum of 185,000 square metres of commercial space (by gross floor area), at an auction reserve price of RMB 3.59 billion ($520 million).
However, it will take more than just cash to purchase this particular piece of China’s high-tech heartland.
Winning bidders are required to use at least 60 percent of the finished space for their own operations and only 35,000 square metres of office and 34,800 square metres of retail space, accounting for nearly 38 percent of the total construction area, can be sold to other occupiers.
Of the space that is approved for sale, the 35,000 square metres of office accommodation can only be sold to companies designated by the Nanshan district government, and the price of these offices cannot exceed 70 percent of the market price in the same area at the time of sale, according to the local government’s conditions.
The site, which is located between Binhai Avenue, Shenwan First Road, Shenwan Fifth Road, Baishi Third Road, and Baishi Road in the economic zone, faces Hong Kong across Shenzhen Bay. The tender for the project, which is about 20 minutes’ drive from the Shenzhen Bay Checkpoint, closes on November 27th.
The Shenzhen government, which has helped make the city a mecca for tech firms, has a tendency to structure land sales in ways that favour established corporate players in the country. Even given the restrictive conditions imposed, however, developers such as New York’s Tishman Speyer have previously taken part in these projects through joint ventures with corporate occupiers.
Vanke, Evergrande Buy Plots in Shenzhen Development
Shenzhen Bay Super Headquarter Base was launched by the Shenzhen government in 2007, with the goal of attracting major corporates to set up head offices in the area bordering Hong Kong. To date, the government-sponsored economic development zone has attracted major corporations including CITIC, China Merchants Bank and ZTE Corporation to set up shop and develop their own headquarters in the 1.2 million square metre zone.
In December 2017, two of China’s biggest developers bought their own plots in the Shenzhen Bay project, with both China Vanke and Evergrande announcing that they would develop the sites into their future national headquarters.
China Vanke, the country’s third largest developer in terms of sales in the first half of 2018, bought a 19,227 square metre site for RMB 3.14 billion, which is approved for construction of a commercial tower of up to 167,000 square metres. The developer, which is controlled by a unit of the Shenzhen government, broke ground on the project this past April with plans for the tower to become the developer’s sixth headquarters in China.
Also in December last year, Evergrande Group, which earlier relocated its headquarters from Guangzhou to Shenzhen, paid RMB 5.55 billion for a 10,376 square metre site next to China Vanke’s future headquarters. The parcel purchased by China’s largest developer by sales is approved for construction of a commercial tower of up to 289,200 square metres by GFA.
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