Jeremy Kelly of JLL research
Although China’s current real estate slump is driving many investors back to the safe havens offered by China’s biggest metropolitan areas, the best locations for real estate opportunities may be in nine, just slightly smaller cities.
The China60 report issued earlier this month by property consultancy JLL surveyed 60 emerging cities across China for opportunities across all real estate sectors, and found that the best opportunities may lie in what they have dubbed the “Tier 1.5” cities.
These up and coming urban areas rank just below China’s megacities of Beijing, Shanghai, Shenzhen and Guangzhou in terms of population and contribution to the nation’s economy, but may offer investors the opportunity to acquire assets at more affordable prices while still enjoying favorable growth prospects.
China’s Tier 1.5 Cities Among the Fastest Growing Globally
In the report JLL identifies nine of China’s second tier cities as separating themselves from the pack to reach “Tier 1.5” status, just below the level of the country’s biggest cities. These fast emerging communities include usual suspects such as provincial capitals and provincial level cities Chengdu, Chongqing, Hangzhou, Nanjing, Shenyang, Tianjin and Wuhan.
The list of mini-mega-cities also includes Suzhou, which benefits from its proximity to Shanghai, and Xi’an, which the report identified as among the fastest emerging of China’s major real estate markets.
According to JLL, “All 10 of the world’s fastest-growing large cities are in the China60, topped by the Tier 1.5 cities of Tianjin, Chongqing, Chengdu and Wuhan.”
Xi’an was cited for achieving one of the greatest improvements of any of the cities surveyed since the last time that the report was published in 2012. The capital of northwestern China’s Shaanxi province was said to have improved at least in part because of its position as a hub for the fast-growing northwest region of China.
China’s Second Tier Cities Larger Economically Than Japan
While many investors still concentrate on what JLL termed the “Alpha Cities” of Beijing, Shanghai, Guangzhou and Shenzhen, part of the mission of the report is to clarify the importance of China’s emerging cities, even during the current real estate downturn.
Jeremy Kelly, a director of JLL’s global research team, noted that, “The cities comprising China60 would be the world’s second-largest economy in terms of purchasing power, and despite the economic slowdown, are projected to contribute 15 percent of global growth over the next decade.”
This economic output would rank these 60 cities ahead of Japan, and behind only the US globally – even without including China’s largest urban centres.
Watch the West (and the Centre)
While the report declined to name specific winners or losers in China’s growth race, it did note that the real estate markets in China’s western and central regions have grown most quickly since the last time the report was published in 2012.
Xi’an, Guiyang – the capital of southwestern China’s Guizhou province, and Kunming – the capital of Yunnan were pointed out as among the faster growers, along with Zhengzhou and Shijiazhuang in northern China.
JLL attributed the strong growth in these traditionally less developed cities as owing to “a combination of government policy, infrastructure investment and the continued shift inland in the balance of economic activity.”
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