The Beijing government has retroactively restricted the height of buildings in a prime plot of the city’s core business district to as low as 100 metres, truncating the building heights and potential investment returns of developers who purchased more than RMB 8.6 billion ($1.37 billion) in sites in the area at least seven years ago.
The new government directives affect eight office projects owned by investors including HSBC Holdings, CICC, Hongkong Land and Anbang Insurance Group, with the project developers now required to scale back their design plans to fit the new verbal guidelines.
The height restrictions come as part of a campaign by the government of China’s capital city to cap population, and reduce the amount of city land that hosts construction.
Core of Beijing CBD Hit by New Height Restrictions
The affected area in Beijing’s CBD is located north of Jianguomen Outer Street and east of Third Ring Road in the capital’s Guomao commercial zone, and lies just south of the landmark CCTV Tower. The mega-site, which was characterised in a JLL report last year as Beijing’s “superblock,” is made up of 15 plots, which were sold in 2010-2011, anchored by CIC and CITIC’s 528 metre China Zun tower.
The new directives, which have yet to be issued in written form have been communicated to developers by city officials, according to executives with property agencies who spoke with Mingtiandi.
Eight plots in the Core Area have yet to commence construction and are affected by the curbs, according to Emily Cao, Head of Research for North China in Colliers International.
“We have had developers coming to us recently for suggestion on the redesign of the projects, because of the height restriction set by the government,” said Cao during a phone interview with Mingtiandi. “The completion of these projects will thus be postponed for at least a year as redesigning and government approvals take time.” The projects are now expected to be completed in 2022-23, Cao added.
The office supply in floor area in the affected area will decrease by 10 to 30 percent due to the height restriction, Cao predicts.
A report from JLL this month said that the Beijing government has capped office tower height at around 100-180 metres in the core area of the CBD, as the affected zone is known, with exceptions made for projects where construction of the exterior has already surpassed the height limit. “The policy is expected to have little impact on near-term supply, but will reduce future supply later over the forecast horizon and further delay completions,” said JLL in the report.
Issuing Planning Guidelines Seven Years After Awarding Sites
While the Beijing government has yet to officially announce the height cap, in the Beijing City Overall Plan (2016-2035) published in September 2017, the capital’s urban planning committee indicated that the government will “strictly control the height and location of ultra-tall buildings that are over 100 metres,” for “more comfortable public space” in the capital city.
The affected sites — Z1a, Z3, Z4, Z5, Z6, Z8, Z9 and Z10 — were sold via a pair of high profile public tenders in December 2010 and July 2011. In December 2010, CICC, Vantone Group and Hongkong Land acquired site Z3 for RMB 2.5 billion, China Minsheng Bank won site Z4 for RMB 3 billion, Z5 was sold to a consortium led by Anbang Insurance Group for RMB 2.5 billion, and Z6 was awarded to Sino-Ocean Group Holding and HSBC Holdings for RMB 3.9 billion.
In July 2011, sites Z1a and Z8 were awarded to China International Futures, a consortium led by sovereign wealth fund China Investment Corporation and CITIC Group, while Anbang Insurance led another group of investors in acquiring sites Z9 and Z10 on the same day.
Early Builders Saved From New Directives
Meanwhile, other builders who own projects in the area might be glad that they started construction in a timely fashion. The future headquarters of CITIC Group, China Zun, a substantially finished 108-storey building will reach 528 metres — 198 metres higher than the China World Trade Centre Tower III, and some 340 metres above the new guidelines.
Shanghai-based CP Group’s CP Center, sitting on the Z14 site, is expected to complete within this year at a height of 238 metres, and the China Life Financial Center located opposite CP Center, is also nearing completion at 189 metres high.