Shifting Real Estate Development Priorities

Posted on April 25, 2011 by Adam Mayer

Last week I had a chance to chat with Russell Flannery, the Shanghai bureau chief for Forbes magazine, at a conference I spoke at in Luoyang, Henan Province. I talked to him about the shift in real estate development focus in China from residential to the retail and commercial sectors. Below is a reproduction of the interview from Forbes:

Shopping Malls Become China Real Estate Hot Spot As Economy Shifts

Shopping malls are becoming a China real estate hot spot as government efforts to ease housing prices reduce interest among developers in building apartment complexes.

So says Adam Mayer, a USC-educated senior project architect based in the western Chinese city of Chengdu for Cendes, a Singapore-founded architecture firm with projects in more than 20 Chinese cities. Rapid growth in Chinese retail spending, he says, “represents a shift of the Chinese economy from one of production to a more domestic, consumer-oriented market.”

I talked to Mayer on the sidelines of a conference about the business outlook in central China held yesterday in Luoyang, one of China’s ancient hubs. The event was being organized by Forbes China, the licensed Chinese-language edition of Forbes magazine, and the city government, and attracted speakers from IBM and GE. Excerpts follow.

Q. China’s government seems to be slowing down the pace of the real estate industry right now. To what extent do you feel any of that in your own company?

A. We do see it in the sense that there’s a shift away from such rapid development of residential property. Not all residential types, though, just, specifically, the high-rise clustered residential you see in all cities across China. The shift is more toward villas, which in the U.S. we would call detached houses. These are not intended to be primary residences. Rather, they are intended and marketed towards wealthy individuals who want a second home or a vacation home that’s outside the city.

What we’re seeing now is a huge growth in the retail sector in the design and developments of shopping malls, especially in Chengdu where we have a lot of work, and also in Kunming, the capital of Yunnan Province. We’ve been seeing a lot of mixed-used developments in the planning phases now. These are typically 4-5 storey retail shopping malls (that) in architectural terms we call a podium. These are usually high density sites. They have high floor to area ratios, which are zoning numbers that tell you how much square meters you can build on that site. These are usually in center city areas, and also around the second or third ring roads that are developing out from the center, typically around transit hubs where there might be a subway station. There are retail podiums with office towers, or it could be a hotel tower and also some residential tower on top.

Q. What’s driving that investment?

A. I think it’s really more about retail. The developers are maximizing the FAR (floor to area ratio), and that’s why they’re building towers on top, but the retail really represents a shift of the Chinese economy from one of production to a more domestic, consumer oriented market. So we see real estate developers really pushing hard (on) the retail development.

Q. In the old days, Chinese developers were making plenty of money just by building those tall residential buildings and selling them out quickly. Now, those same builders appear to be increasingly interested in commercial property. Do you see signs of that?

A. For sure. If developers are only in the residential sector, they definitely need to diversify. Also, when it comes to geographical development, (there’s a) shift of development of China moving from the coast inward (and) west. We see that happening to even further west than Chengdu, and, if you can imagine, into Urumqi and Xinjiang Province.

Forbes: Shopping Malls Become China Real Estate Hot Spot As Economy Shifts

How China’s Megacities Have Avoided Problems of Other Developing Cities

Posted on April 11, 2011 by Adam Mayer

Urbanist media can’t seem to get enough of the megacity these days. Much of the commentary surrounding this topic is disconcertingly celebratory about these leviathans despite such phenomena as overcrowding, high levels of congestion and sprawling slums.

Yet absent from most of the commentary is any mention cities in China. This is perhaps due in large part to the lack of serious social problems in comparison to its developing city counterparts in other countries. If a megacity is defined as a city with a population of more than 10 million, then China is home to 5 megacities: Shanghai, Beijing, Shenzhen, Guangzhou and Dongguan. As the country continues to urbanize, more Chinese cities are bound to join the ranks of these megacities.

How has China been able to avoid the pitfalls facing other developing megacities? No one is denying that Chinese cities don’t have problems including unequal income distribution, pollution and growing traffic congestion. Yet China’s megacities seem to have largely avoided social dangers such as violent crime, disease and slum proliferation that plague urban areas of other developing countries.

Following I have identified five points as to how China’s cities have avoided these issues: Continue reading →

China’s Air Traffic Glut and the Case for High-Speed Rail

Posted on March 20, 2011 by Adam Mayer

Recently there has been an increase in questions raised about China’s unrelenting ambitions to connect the country with high-speed rail. Some commentators question whether the new lines will meet projected capacity, others argue that ticket prices are out of reach for China’s workers, and there is even concern over the safety of the tracks.

Yet given the benefit of the doubt, there is no question that expanding high-speed rail needs to remain a top priority in developing a comprehensive national transportation network. It isn’t as if China has invested only in high-speed rail at the expense of other forms of transportation infrastructure such as roads and airports- in fact the country has been busy building both in addition to focusing on trains. Continue reading →

Chengdu and Chongqing Leading the Way in Hukou Reform

Posted on March 10, 2011 by Adam Mayer

The hukou system, or household registration system, is a method of accounting for the country’s population by requiring each citizen to officially register his or her place of residence.

Possessing an urban hukou in a large city means that one is an official ‘resident’ of that city and eligible to receive benefits such as access to medical insurance and education as well as the right to purchase property. This poses a problem for the floating population of rural migrants to cities who are not afforded similar benefits due to their lack of an official urban hukou.

Given the difficulty rural migrants have in obtaining an urban hukou, most have no incentive to settle in a city once their period of work is finished. This means that until the system is reformed, rural migrants will always have one foot in the big city and one foot back in the village. Continue reading →

Urbanizing Towards a Clean and Sustainable Future

Posted on March 4, 2011 by Adam Mayer

An article I wrote about the sustainable development in China’s cities was recently published in the Winter 2010/2011 Issue of the British Chamber of Commerce South West China Magazine “Face“. The piece examines the historical context under which China’s cities are currently developing and looks at some of the important decisions being made by civic leaders, arguing that they will ultimately prove to be beneficial in the long-run.

For the readers of the China Urban Development Blog, here is a reproduction of the original piece: Continue reading →