In Beijing, office buildings rise to meet the demand By R. Scott Macintosh Published: WEDNESDAY, MAY 31, 2006

BEIJING: Bursting through an ever-increasing number of concentric highways, China's

capital is a sprawling city, as flat and round as a pancake. But, as the city continues to

spread with the construction of a sixth ring road, development also is stretching skyward.

In the next two years, as Beijing prepares for the 2008 Olympic Games, the city will build

five of its tallest buildings. The new skyscrapers, all in the Central Business District, will be

partly the result of a municipal plan mapped out in 2001 that has allowed the area to

become Beij ing's center for finance, telecommunications and media and a magnet for

multinational companies and foreign investment.

"The CBD will become the largest office market in Beijing by 2008," said Anna Kalifa, head

of research in Beijing for Jones Lang LaSalle real estate. "There will be a lot of things to

do, a lot of shopping and a lot of amenities."

Right now, however, the largest stock of new office space is at Zhongguancun Science

Park, just inside the fourth ring road, in the northeast part of the city. Tenants of the park

inc lude research and development centers for high-tech giants like IBM and Microsoft and

many university laboratories and engineering centers.

Last year, according to Colliers International real estate agency, the total office supply in

the city was 788,000 square meters, or 8.5 mill ion square feet, nearly twice the space it had

in 2004. Sixty percent of that new space was in Zhongguancun and the Central Business

District.

Meanwhile, billboards line the third ring road on the north side of the city urging passersby:

"Tell CBD, 'You're not perfect.'" There, in the Olympic corridor, $2 billion is being spent on

sports facil ities, including an 80,000- seat stadium. After the Games, the buildings will be

turned into convention and exhibition centers; a telecommunications center also may be

adapted to commercial purposes.

Yet in the core of the Central Business District, which covers 30 hectares, or almost 75

acres, there already has been an investment of about 20 billion yuan, or $2.4 bill ion, in

commercial space.

More than 60 percent of the city's foreign-funded companies have offices there, and

multinationals, including about 120 Fortune 500 companies, account for a third of all

companies with offices in the district, according to the Beijing Central Business District

Administrative Commission. They inc lude Hewlett-Packard, Motorola, Ford, Samsung, Time

Warner and UBS.

When they are finished, the district's five new skyscrapers will add more than 1.5 mil lion

square meters of floor space, mostly offices.

And over the next two years, as parts of the buildings are completed, they will succeed one

another as the tallest in the city.

This year a 63-story tower, the tallest of three that eventually will make up the Yintai Center,

is to be finished and, for at least a brief period, it will hold the title of tallest building in the

city. The tower will include a Park Hyatt Hotel with 180 luxury apartments and 48 serviced

apartments.

Merrill Lynch, the investment bank based in New York, is one of the investors, with $30

mil lion in the project.

Next year, when Beijing Fortune Plaza finishes its five-tower complex, the title will pass to

its tallest building, which will rise 260 meters, or more than 850 feet. The towers will be part

of a 720,000-square-meter mixed-use development that includes offices, apartments, and

hotel, retail and convention space, the largest such project in the district.

Then, in 2008, the third tower of the China World Trade Center is scheduled to be finished.

At 330 meters, it is to be Beijing's tallest building, outdone in height only by the antenna of

the Central Radio and TV Tower on the city's west side.

Perhaps the most highly antic ipated project is the China Central Television headquarters, a

complex trapezoidal structure designed by the Office for Metropolitan Architecture, the

architect Rem Koolhaas's firm based in Rotterdam. The Television Cultural Center, a

second building planned for the 10-hectare site, will inc lude a hotel, a theater and

exhibition spaces.

China Television also has purchased about 3,000 square meters in the Winterless Center, a

development in the district core with two towers, a shopping center and a hotel.

As the district's development accelerates, the area is expected to gain 444,000 square

meters of office space by the end of the year and another 572,000 at the end of 2007. Top-

end, or Grade A, office space is expected to top 2 mil lion square meters in the district by

2008.

Historically, the quality of Chinese construction has been an issue for investors and tenants,

particularly multinational companies. While Grade A offices now are generally of good

quality in major cities, there still is variation in the middle- to lower-end developments.

"Large cities can uphold quality better, and projects with foreign investors generally have

better quality, particularly in the construction details," said K.W. Chau, dean of architecture

at the University of Hong Kong. "This may be due to different expectations of consumers in

the mainland and standards of workmanship."

The city's increasing supply of top-end office space is creating more office vacancies and

causing rents to fall in lower-grade offices, according to Richard Middleton, managing

director of Greater China with Cushman & Wakefield, the New York-based real estate

services company.

"It's a very interesting situation in the CBD, because there is a large supply of office space

coming on and very large demand from both Chinese companies and multinationals, who

are expanding aggressively," he said. "What we're seeing is that the higher-quality buildings

on market will attract new tenants, and we'll see an upgrading of tenants moving to better

buildings - a flight to quality."