shenyang city profile - jll · shenyang city profile research report january 2016. ... total...
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Shenyang City Profile
Research Report January 2016
2 JLL
Table of ContentsThe JLL View Economic Dashboard DemographicsDistrictsEconomyInfrastructure
TransportAirRoadRailMetro
Urban PlanningIndustry
Industrial Breakdown
Labour MarketEducationBusiness Environment Major EmployersMajor InvestmentsProperty Market Overview
Key TransactionsKey PlayersOfficeRetailIndustrial and Logistics Residential
45667888889
101111
111212131314141415161718
Mid-GoldenCorridor
North-Golden Corridor
TiexiTaiyuan
Street
CBD
Zhongjie
Hunnan
Metro Line 1
Metro
Line
2
South-GoldenCorridor (Wulihe)
Operating Metro Lines
3Shenyang City Profile
Key Commercial Areas in Shenyang
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Serving as the capital of Liaoning Province, Shenyang has modernised quickly in recent years. Functioning as a major regional transport hub, the Tier 1.5 city has become an important pillar of Northeast China and is expected to play an increasing role in ongoing efforts to revitalise the region. With Shenyang’s GDP set to surpass Dalian in the near future, the city has taken on increased importance. As a gateway to Greater Bohai Bay, and furthermore, the rest of Northeast Asia, Shenyang links the rest of China to nearby Japan, Russia, Korea, and Mongolia. Its strategic location means that Shenyang is well-positioned to advance as a highly influential regional hub in China.
Long regarded as the “home of machinery,” Shenyang comprises a heavy industrial base and competitive manufacturing sector which has helped it attract firms from around the world. At the same time, both domestic and foreign companies continue to consider the city to be the preferred point of entry to China’s northeastern reaches. As Shenyang slowly shifts its economic focus from traditional “rust belt” industries to more service-oriented and sustainable sectors, the city is expected to transform into an increasingly modern and technologically advanced global city.
With automotive companies as renowned as BMW operating in the city, Shenyang has made forays into advanced manufacturing. The city has also made strides in economic diversification over the last several years. Considerable growth in IT and real estate has helped drive employment in the past decade, contributing to steadily growing incomes and an ever-expanding consumer class. With just over a quarter of the population now above an income threshold that supports discretionary spending, Shenyang has the largest consumer class in all of Northeast China. The relatively higher incomes of individuals in Shenyang have been a boon for rising living standards, creating impressive growth in mobile phone subscriptions, petrol consumption, and Internet usage. The strong consumer culture that has taken hold in and around the city has also benefited Shenyang, which boasts the highest retail sales in the region.
Following a surge in residential and commercial real estate growth over the past decade, the last few years in Shenyang have seen the emergence of more quality projects. This has led to a small, but growing number of premium-grade properties sprouting up in high-profile areas of the city. These quality projects are helping to raise the overall sophistication of the local property market. Shenyang is also supported by extensive transport infrastructure, including a high-speed rail line connecting Shenyang to Harbin. Another high-speed rail line linking Shenyang with Beijing is expected to make the Northeastern city much more accessible to the wide range of companies headquartered in the nation’s capital. Construction of this new line is scheduled to complete in 2019.
Tagged among the fastest-growing Chinese cities by the Economist Intelligence Unit (EIU) at the start of decade, Shenyang underwent a multi-year period of ferocious growth, which triggered an explosion in building construction in the city. Business prospects were everywhere, and home and vehicle ownership rates multiplied quickly while growth in consumer-spending on big-ticket household items skyrocketed. Presently, however, under a slowing economy, the large amounts of new supply have led to challenges, especially in retail. Also, ongoing anti-corruption campaigns continue to weigh on luxury sales in Shenyang, which comprises China’s third-largest luxury market.
The economic slowdown is reflected in the primary, secondary, and tertiary sectors as well as decreasing levels of foreign direct investment. Similar to major cities in China, Shenyang is faced with an ageing population and a weakening birth rate. Thus, despite its positioning as a regional transport powerhouse, the city also faces challenges ahead. However, with dedicated economic support for the region as promised by official leaders in 2015, Shenyang will forge on to help the region begin to narrow the gap with China’s wealthy eastern and southern regions.
The JLL View
Shenyang’s Competitive Positioning
Tier 1 CoreTier 1.5 TransitionalTier 2 Growth
Suzhou
Ningbo
Shanghai
Wuxi
Wuhan
TianjinTokyo
SeoulBeijing
Dalian
Jinan
Shenzhen
DongguanGuangzhou
Shenyang
Zhengzhou
Xi’an
HefeiHangzhou
Chengdu
Chongqing
Changsha
Qingdao
Nanjing
Taipei
MacauHong Kong
XiamenTier 3 EmergingTier 3 Early Adopter
Nantong
Wenzhou
Changzhou
Hohhot
Yantai
Foshan
Harbin
Changchun
Shijiazhuang
Nanchang
Nanning
Fuzhou
Kunming
JinhuaShaoxing
Jiaxing
ZhongshanZhuhai
Guiyang
Shantou
Haikou
Quanzhou
Tangshan
Weifang
Jilin
Lanzhou
Taiyuan
Luoyang Xuzhou
Xiangyang
Urumqi
1-hou
r fligh
t
3-hou
r flig
ht
2-hour flight
5Shenyang City Profile
Economic DashboardSizeTotal Population* (million, 2014) 8.3GDP (RMB billion, 2014) 710GrowthTotal Population (from 2005 to 2013) 8.3% Real GDP (2014 ) 6.0% InfrastructureAir Passenger Traffic (Total Trips) (millions, 2013) 4.1 Freight Traffic (Rail, Road, and Air) (million tons, 2013) 214.9 OpennessActual (utilised) FDI (USD million, 2013) 5.8Exports (USD billion, 2013) 7.0WealthGDP per Capita (RMB, 2014) 85,812Urban Disposable Income per Capita (RMB, 2014) 34,233Education and LabourHigher Education Institutions (2013) 53Total Enrolment (2013) 475,700Unemployment (%, 2013) 3.0Average Annual Wage (RMB, 2013) 52,461
Source: EIU except: Freight Traffic, Higher Education Institutions, Total Enrolment, and Unemployment, which come from Shenyang Statistical Bureau’s 2014 Yearbook. Note: Total population refers to permanent residents; those actually residing in the city for a minimum of six months.
1st in Northeast China for City Competitiveness (2013)
16th in China for City Competitiveness (2013)
7th in China’s Fashion Consumption Cities (2012)
10th in Global Fast-growing Cities (2012)
Source: China Institute of City Competitiveness (latest rankings available for Shenyang)
Source: JLL Research, China60 (www.jll.com/china60)
Shenbei New District
Liaozhong District
Yuhong District
Tiexi District
Sujiatun District
Dongling District(Hunnan District)
HepingDistrict
HuangguDistrict
DadongDistrict
ShenheDistrict
SuburbanCore
Note: Xinmin, Faku, and Kangping counties not included in map.
Shenyang Core and Suburban Areas
North China Population (2014)
Source: Municipal Statistics Bureaus
Population Population Growth CAGR (2010-14) (RHS)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
0
5
10
15
20
25 Population (million) Growth
Beijing
Tianjin
Shenyang
Qingdao
Harbin
Dalian
Changch
un
2.1%
1.6%
0.6% 0.8% 0.4% 0.4% 0.5%
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Shenyang’s Districts and Counties
District Area (sq km) Population*
Density (people/sq
km)
Core
Dadong 100 689,576 6,896
Heping 60 645,399 10,757
Huanggu 66 817,288 12,383
Shenhe 60 716,417 11,940
Tiexi 286 907,091 3,172
Subtotal 572 3,775,771 6,601
Suburban/Periphery
Yuhong 499 435,333 872
Suijiatun 782 428,859 548
Dongling (Hunnan) 734 324,074 442
Shenbei 884 320,370 362
Liaozhong 1,645 532,900 324
Xinmin City 3,297 690,703 210
Faku City 2,281 447,952 196
Kangping County 2,167 352,434 163
Subtotal 12,289 3,532,625 288
Total 12,861 7,308,396 6,889Source: Shenyang Statistical Bureau (2014 Yearbook)Note: Population refers to registered residents only; there are fewer registered residents than there are permanent residents.
DemographicsLiaoning’s capital ranks as the largest city in the province by population and the second-most populous in the region, behind Harbin. In line with other major Northeast cities such as Dalian, Harbin, and Changchun, Shenyang’s population growth has been steadily inching upwards over the past five years, and the city is also expected to maintain stable population growth ahead. Unlike smaller cities and towns in the region, Shenyang will be less affected by the migration of talent to other regions in China. However, due to Shenyang’s aging population, the city will need to address a shrinking labour force as the city’s number of retirees grows. This is a similar situation to many major cities in China. Meanwhile, also like the rest of China, the low birth rate trend indicates that the size of Shenyang’s next generation will be significantly smaller, with just 0.74 children born from every couple.
DistrictsThe city is comprised of five urban districts (the core), five outer suburban districts, and three peripheral counties, with the majority of the population living in the city’s core. Shenhe, the city’s most densely populated district, is home to the city’s government and most of Shenyang’s commercial submarkets. The outer suburbs and peripheral counties contain an extensive amount of land and have a lower population density. Over the past 15 years, the local government has focused on the development of Dongling District (Hunnan District) and Shenbei District, with a policy to extend the city in a northward and southward direction. The city of Xinmin is the largest and most developed economy on Shenyang’s periphery.
North China GDP (2014)
North China Retail Sales (2014)
Source: EIU
Source: EIU
Nominal GDP (USD) Real GDP Growth (2014) (RHS)
0%
2%
4%
6%
8%
10%
12%
0 50
100 150 200 250 300 350 400 USD (billion) Growth
Beijing
Tianjin
Shenyang
Qingdao
Harbin
Dalian
Changch
un
7.3%
10.0%
8.0%
5.8% 6.0% 6.6% 7.0%
2014 Retail Sales
Beijing
Tianjin
Shenyang
Qingdao
Harbin
Dalian
Changch
un
Retail Sales Growth CAGR (2009-14) (RHS)
10%
11%
12%
13%
14%
15%
0
200
400
600
800
1,000
1,200 RMB (billion) Growth
10.4%
12.4% 12.3%
11.2%
12.6% 12.5% 12.6%
7Shenyang City Profile
EconomyShenyang’s major industrial GDP contributors are labour-intensive heavy industries, with equipment manufacturing leading economic output. Key economic drivers in the city also include high-tech equipment and IT. However, as outlined in China’s 13th Five-Year Plan (2016-s2020), efforts to help the Northeast develop more service-oriented industries are in motion, which will also help address overcapacity concerns in manufacturing. Shenyang has also seen a recent rise in peer-to-peer finance and wealth management companies, which is another source of economic growth and job creation.
In 2014, Shenyang’s GDP growth slowed to 6.0% y-o-y after several years of fast growth. Still, nominal GDP stood at RMB 710 billion by end-2014, which was the second-largest in Northeast China and more than double the 2007 figure. The decrease was largely due to declines in fixed asset investment, which dropped to just 2.8% in 2014. This includes highways, bridges, airports, and other infrastructure as well as physical buildings. Due to less investment in manufacturing, particularly in the automotive and equipment production sectors, as well as less spending on infrastructure, slower GDP growth is expected in the next several years.
Considered the retail hub of Northeast China, the city generates the highest volume of retail sales in the region. Since 2009, retail sales have seen annual growth of over 12%. However, growth in this area is slowing due to ongoing anti-corruption campaigns which have curtailed the use of public funds for retail spending. In 2014, Shenyang’s total retail sales were RMB 357 billion. That same year, urban expenditure in Shenyang increased to RMB 26,989 per person annually, up 9.5% from 2013. While oversupply concerns in retail are not to be taken lightly, regionally strong retail sales and relatively high disposable incomes support a healthy consumer culture in Shenyang, making the city one of the more attractive Northeast China markets for retailers, particularly as an entry point to the region.
Economic BackgroundThe local government has outlined sweeping economic goals for its primary development areas: Hunnan and Yuhong districts as well as Changbai Area and the southern pocket of Shenyang Development Zone. Along the Golden Corridor, development plans have concentrated on improving the modern service industry and the overall quality of both commercial and residential amenities in the area. Meanwhile, in Shenyang Economic Development Area
(SEDA) in the west of the city, the focus has been on developing the zone as a new industrial city centre since heavy industry factories began moving out of Tiexi District in 2002.
At the height of its productive peak in the 1970s, Shenyang, along with Tianjin and Shanghai, was one of China’s three major industrial cities. Its heavy industry became well developed before the Second World War, with most of its factories centred in the Tiexi District. However, as heavy industry began to decline in the 1980s, Shenyang’s economy stagnated, but due to China’s growing economy and the national government’s “Revitalize the Northeast” initiative, Shenyang has seen invigorated and significant growth in the past decade-plus.
Nanjing
ChongqingChengdu
Shenzhen/Hong Kong
Shanghai
Beijing
Zhengzhou
Changsha
Guangzhou
Lanzhou
Xi’an
Kunming
Shijiazhuang
Taiyuan
Shenyang
Dalian
Harbin
Nanchang
Fuzhou
QingdaoJinanTianjin
HefeiHangzhouWuhan
Changchun
NanningFuture Beijing-Shenyang High-speed LineOperating LinesLines Under Construction (Major Routes)
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Express and High-speed Rail Network (2015)
Infrastructure
and freight traffic forecast to multiply over the coming years, the municipal government planned ahead and opened a new 248,000 sqm-terminal in 2013. The world-class terminal has the latest in technology and amenities and stands side by side with those of key hubs like Beijing and Shanghai. By 2020, the passenger and cargo volume is expected to nearly quadruple from 2010 levels, with the airport projected to handle around 17.5 million passengers annually and up to 240,000 tons of cargo per year.
RoadShenyang’s key roads within its regional network currently include the Shenyang-Dalian, Shenyang-Dandong, Shenyang-Harbin, and Beijing-Shenyang expressways.
RailThe planned Beijing-Shenyang high-speed rail line will start at Shenyang North Station and pass through the cities of Xinmin, Fuxin, Chaoyang, and Chengde before reaching Beijing. With a total track distance of 684.3 km and a designed speed of up to 350 km per hour, the government has budgeted RMB 700 billion to build the new line. Upon completion, it will reduce travel time between Shenyang and the nation’s capital to just two hours and 17 minutes. It is expected to complement the Harbin-Dalian high speed rail line. The combined effect of both lines will dramatically improve accessibility of the northeast region from the rest of the country.
TransportA key transport hub in Northeast China, Shenyang has developed a relatively extensive transport infrastructure, with an advancing road and rail network and an extended international airport. The completion of the high-speed rail from Shenyang to Harbin in 2012 has since improved connectivity in the region tremendously, cutting the travel time between the two major northeastern cities to less than two hours and 30 minutes and improving travel convenience for people in smaller cities along the way. Further plans to better link the vast region to the rest of country feature the construction of a new high-speed line linking Shenyang to Beijing. Construction for the line is slated for completion in 2019. The route is not only expected to greatly enhance economic cooperation between Liaoning and Beijing, but also bring new opportunities to the Bohai Economic Rim and help expedite regional integration, an important driver for growth and development of the Northeast.
Air Shenyang Taoxian International Airport is the main airport of Liaoning Province as well as a major international airport for northeastern China. Located about 18 km from the city centre, and less than 100 km from Fushun, Benxi, Anshan, Tieling, Liaoyang, and Yingkou by road, it serves some 80 airlines and 50 cities within and outside of China via nearly 150 routes. Routes include frequent flights to nearby Japan and Korea. With passenger
5
10
7
1
133
104
116
48
2
12
5
3
9
117
46
122
89
113
Shenyang TaoxianInternational Airport
ShenyangStation
Shenyang North Railway Station
Operating Lines
Planned Lines
9Shenyang City Profile
Shenyang Metro Plan (2012-2018)
Source: Shenyang Government Website
MetroThe city’s metro plan was approved by the State Council in 2005 and construction started in the same year. The current plan is extensive and calls for the building of 11 new lines to add to the city’s two existing metro lines: Line 1 links prime office areas with major retail hubs in Golden Corridor, Taiyuan Street, and Zhongjie Street areas. Line 2, which runs through Golden Corridor, has
greatly improved transportation in this geographically elongated area; it also connects to the airport, significantly reducing travel times to and from the city centre. Meanwhile, the completion of the planned metro lines will improve Shenyang’s traffic conditions and, furthermore, is already leading to increased real estate activity in areas close to the metro stations, pushing some downtown residents to the urban periphery.
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several landmark buildings and also served as the location for key projects of the National Games in 2013. At the Golden Corridor’s core is the city’s CBD, which has attracted many foreign and domestic banks, such as Bank of China, People’s Bank of China, United Overseas Bank, and Bank of East Asia. The Golden Corridor contains more than half of Shenyang’s Grade A and Grade B office buildings, including the China Resources Building, which is the city’s first international Grade A office building. The area is also home to high-end retail properties and five-star hotels. Located in South-Golden Corridor (Wulihe), Orchard Summer Palace is another recent Grade A project to enter the area, targeting tenants from Shenyang’s growing IT, finance, and professional services sectors.
Agricultural and Food Procession CentreShenbei New District is being developed as the largest agricultural and food processing centre in Northeast China. Famous domestic and foreign corporations such as Coca-Cola, Huishan Dairy, and Mengniu Dairy have already set up factories in this development zone. In recent years, the area has become a hub for innovation in agricultural processes. The area started out as a new rural community in the 1990s with a vegetable production base spanning 6.7 million sqm. The latest farmland facilities project for the area plans to cover a land area of 10 million sqm to promote the development of a “green” carrot industry. Funding for this project from the Land Management Department is expected to be approved in 2016.
Automobile Industrial Production BaseThe government plans to establish Shenyang’s Auto City in Dadong District as an important base for the automobile industry. By late 2014, Dadong District had 16 projects in the area with a total investment of RMB 4.76 billion. Investors include South Korea’s Lotte Group, Fangzheng Tool Company, and German automotive supplier Brose Group. Meanwhile, BMW has been expanding rapidly here over the past 12 years; it has invested heavily to localise and integrate in the Shenyang market. In 2014, BMW produced 288,000 cars in China from both of its plants in Shenyang; the figure was up 33.9% y-o-y. The BMW plants generated a total annual value of industrial output of RMB 100.4 billion, up 21.4% y-o-y. BMW’s China operations also contributed RMB 16.5 billion in taxes to the local government, a 17% increase from 2013. In the first half of 2015, the BMW factory at Auto City produced 145,200 cars, realising an industrial output of RMB 49.65 billion. BMW is among the leading industrial enterprises in the city, part of an elite group with a total output value that exceeds RMB 100 billion. One of the most important contributors to the local economy, BMW is expected to continue playing a major role in the development of Shenyang with plans to produce new products (in addition to existing ones) in the city from 2016.
Urban Planning Industrial Area within Tiexi District The industrial area in western Shenyang covers around 850 sq km. The local government has supported the area’s development by granting incentives such as low-cost land and temporary tax cuts to companies that decide to locate in the area. In 2014, Global Logistics Properties (GLP) held its first global meeting for its board of directors in Shenyang, underlining the company’s confidence in Shenyang and Tiexi governments. The meeting discussed future development plans for GLP’s Shenyang Huanpu International Logistics Park in SEDA. With a gross floor area of 290,000 sqm, the logistics park in Tiexi District is scheduled for completion by end-2016. Over the past five years, land transactions in Tiexi District have been the most active in Shenyang as major developers, including China Resources Land, China Overseas, and CIFI Group have recognised the potential land value of this area. This has accelerated the pace of the area’s industrial restructuring and upgrading under the banner “One Industrial Park, One New City, and One Industrial Valley.” High-profile projects presently under construction in Tiexi District’s SEDA include China-Germany Industrial Park and China-France Eco-City. Upon completion, China-Germany Industrial Park will be an effective platform for initiatives such as “Made in China 2025.” The programme is inspired by Germany’s “Industry 4.0,” which is focused on automation and advanced manufacturing. Meanwhile, a total land area of some 30 sq km is planned for the development of China-France Eco-City, a project that aims to build up a local industry for green technologies in equipment manufacturing.
National New and High-Tech Industrial Development ZoneLocated in the centre of Hunnan District, Shenyang’s National New and High-Tech Industrial Development Zone covers an area of approximately 400 sq km and is focused on the development of the local IT industry, particularly its software, hardware, and communications sectors. Neusoft was the first company to establish a base in the zone in the 1990s, and after 17 years of operation, the output of Neusoft alone had reached RMB 20 billion. In 2014, domestic industrial design company ECHOM invested RMB 2.5 billion to build ECHOM Industrial Design Valley, a business park in Hunnan District. It is expected to have a total gross area of 530,000 sqm upon completion, which is slated for 2018. In the same year, Jinlian Group invested RMB 2 billion to build a new industrial park. The Jinlian Innovation Park is planned to cover an area of 500,000 sqm to house factories.
Golden CorridorLaunched by the local government in 2003, the Golden Corridor project is a strip connecting the north and south of Shenyang, and is the base for most of the city’s modern service industries. Serving as the showpiece of a new metropolitan image, the area is home to
Shenyang’s Employment by Industry (2013)
Source: EIUNote: Totals do not equal 100.0% due to rounding.
Primary Industries;
0.2%
Teritary Industries;
53.4%
Secondary Industries;
46.4%
11Shenyang City Profile
IndustryIndustrial BreakdownShenyang is one of the largest heavy industry centres in China, with a total industrial output value of RMB 1.37 trillion from key industries in 2013. The three most important industries are equipment manufacturing, automobile and auto parts manufacturing, and construction materials manufacturing.
Pillar Industries in Shenyang
Rank Industries Industrial Output (RMB billion, 2013)
Percentage (%)
Total Industry 355.11 Equipment Manufacturing 174.4 49.1
2 Automobile and Auto Parts Manufacturing 45.6 12.8
3 Construction Products Manufacturing 32.8 9.2
4Industrial Processing and Manufacturing of Agricultural Products
67.0 18.9
5 Chemical Products 17.1 4.8
6 Smelting and Pressing of Ferrous Metals 18.2 5.1
Source: Shenyang Statistical Bureau (2014 Yearbook)Note: Percentage totals do not equal 100.0% due to rounding.
Labor Market In 2013, total employment in Shenyang reached 7.3 million people; the figure was stable with previous years. With construction and manufacturing dominating the local labour force, these sectors account for around 40% of the city’s employment. Shenyang’s tertiary sector is the largest tertiary sector employment base in all of North China outside Beijing.
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Business Environment Since 2003, Shenyang has been both the centrepiece and largest beneficiary of the State Council’s “Revitalise the Northeast” initiative in which national support has been given to the local government to implement policies and financial incentives to improve the city’s business environment. For example, with this support, the Shenyang government has been able to help companies such as BMW, GLP, and General Motors with land purchasing, development, facilities, and employee recruitment.
With the local government encouraging more foreign direct investment through tax incentives and preferential material supply services, an increasing number of MNCs have opted to conduct business in Shenyang. Relatively low labour costs combined with a strong supplier network, convenient logistics, and excellent infrastructure has also enticed domestic and foreign companies to invest in the city. This has helped the city prosper both economically and socially. In 2014, the average disposable income of an urban resident was recorded at RMB 34,233, increasing 17.7% y-o-y; the per capita consumption expenditure was RMB 24,223 on an annual basis with an increase of 11.0% compared with the previous year. Moreover, the abundance of well-trained and highly-skilled workers has acted as a serious draw for several international firms to establish manufacturing bases in the city.
EducationAccording to China’s Sixth Population Census (2010), the number of people with a tertiary education or higher accounted for 20% of the city’s total population. In 2013, there were a total of 53 higher education institutions in Shenyang, including five independent colleges. That same year, these schools produced nearly 57,000 graduates, strengthening Shenyang’s position as an academic hub of Northeast China. Compared with Shenzhen, a Tier I city in South China, for example, Shenyang has a relatively large education base. In 2013, Shenyang’s number of higher education institutions was five times that of Shenzhen, while its graduates numbered more than triple the figure for Shenzhen.
High-profile universities include Northeastern University (renowned for its IT faculty as well as its industrial and science engineering degrees), Shenyang University of Technology (known for its electrical engineering and automation schools), Liaoning University, China Medical University, Luxun Academy of Fine Arts, and Shenyang Conservatory of Music. Several universities in Shenyang have a specific strength in majors that prepare students for manufacturing-related careers, such as work in precision mechanics, engineering, and process automation.
13Shenyang City Profile
Northern Heavy Industries GroupLocated in SEDA, the equipment manufacturing company ranked as
one of the Top 500 domestic enterprises in China in 2009 and employs 10,000 people across China.
Liaoning Huishan Dairy GroupHuishan Dairy Group is one of the largest dairy groups, providing dairy products to the people of Northeast China and employing over 10,000
people in China.
Shenyang Blower Works Group CorporationSituated in SEDA with a total area of 800,000 sqm, the heavy industry
corporation employs nearly 6,000 people in Shenyang, and has investments amounting to RMB 2 billion as well as total assets worth
RMB 9.6 billion.
Neusoft Corporation Founded in 1991, the largest IT solutions and service provider in China
operates its Shenyang business from the city’s National New and High-Tech Industrial Development Zone. Neusoft employs around
14,000 employees across China.
Northeast Pharmaceutical Group Co. Ltd. Established in 1946, the company serves as the region’s most important
pharmaceutical industry and export base and employs over 11,000 people across China.
MichelinA new factory was put into operation in 2013. Michelin invested USD 1.5
billion in this project, and at the time of writing, marked the company’s largest project-investment in China to date. This factory is expected to have an annual capacity of 10 million car tyres, 1.8 million truck tyres,
and 295,000 retreads.
BMWIn 2010, BMW and Brilliance China Automotive Holdings Ltd. – a
joint venture founded in 2003 with operations that currently include production, sales, and after-sales services for BMW vehicles – invested RMB 15 billion to build a new plant in Tiexi’s SEDA. The plant is around
2 sq km and is eventually expected to have an annual capacity of 200,000 cars.
Hang Lung PropertiesIn Shenhe District’s CBD, Hang Lung Forum 66 is the developer’s largest of two projects in Shenyang. A very large mixed-use project comprising
retail and office space, the property boasts a total planned GFA of around 861,200 sqm. The low-zone opened at end-2014, while the mid-zone came online in late 2015. The high-zone is under construction and
is scheduled to enter the market in 2017.
Major Employers Major Investments
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Property Market Overview
Office Grade A (sqm) 817,254Number of Hotels (5-star) 7
Office Grade A Rents (RMB per sqm per month) 96.8Retail (SM*) Rents (RMB per sqm per month) 304.4Industrial Rents (RMB per sqm per month) 21.2High-end Residential Prices (RMB per sqm) 8,828.3Office Grade A Indicative Yield (%) 6.9
Note: SM refers to shopping malls.New Completions - Office Grade A (sqm) 193,044Vacancy Rate - Office Grade A (%) 41.4
China Resources Land: In late 2015, China Resources Land purchased some 263,500 sqm of land in Tiexi District for RMB 1.3 billion. The developer plans to develop the plot as a residential and retail project. Construction is scheduled to start later this year and complete by end-2019. The project follows another land purchase by China Resources in Huanggu District in early 2014. The 160,370 sqm-plot totaling RMB 1.2 billion has been set aside as a mixed-use project designed to feature office, retail, and residential space. It is slated to open by 2020.
Xinglong Group: In 2013, the local department store operator occupied the former space of New Mart Mall in Taiyuan Street. The 124,000 sqm-space marks Xinglong Group’s eighth department store in Shenyang.
BMW: In 2014, BMW purchased 478,000 sqm of land next to its factory in Dadong District. The plot was used to expand the company’s first factory in Shenyang and the project is scheduled to test operations from 2016 and be fully operational by 2017.
Zhuoxin Investment Company: Domestic wealth management company Zhuoxin Investment leased some 3,200 sqm in Hang Lung Forum 66 in early 2015.
Generali China: European finance and insurance company Generali China leased 1,565 sqm in Hang Lung Forum 66 in 3Q 2015.
CITIC Securities: CITIC Securities leased more than 1,000 sqm at the China Resources Building in Shenhe District in early 2015.
Ping An Life Insurance: Ping An Life Insurance leased around 4,600 sqm in Ping An Fortune Plaza in late 2013.
Fushun Tongyi Shihua: The local petrochemical processing company expanded its reach in the market by leasing an additional 2,200 sqm in Heping District in 2012.
Residential: Vanke, China Overseas Land & Investment, China Resources Land, Gemdale, and Country Garden.
Office: China Resources Land, Hang Lung Properties, and Kerry Properties.
Industrial: BMW, General Motors, Sanyo, and Shenyang Machine Tool Company.
Hotel: Sheraton, Hyatt, InterContinental, and Shangri-La.
Retail: Charter, Zhongxing, New World, China Resources Land, Wanda, Hang Lung Properties, and Happy Family.
Retail: Walmart, Carrefour, China Resources Vanguard, and RT-Mart.
Office: Samsung, MetLife, and Ogilvy.
Industrial: DHL, SF Express, Michelin, Walmart, JD.com, and Suning.
Key Transactions Key Players
Real Estate Dashboard, 3Q 2015
Investors Investors
Occupiers
Occupiers
Market Size Benchmark Values
Market Activity
15Shenyang City Profile
Clusters of high-quality projects emerging Similar to many Tier II cities in China, three quarters or more of new occupier demand for Grade A office space in Shenyang is driven by domestic firms. Finance, banking, and insurance companies account for as much as 40% of total new demand. Professional services companies are another major contributor, accounting for up to 40% of new demand, while the remaining demand is mainly coming from IT and high-tech firms. The trend shows a stark contrast to previous years, where trade and manufacturing accounted for a much larger share of Grade A office demand.
Under the slower economic climate, meanwhile, foreign corporate expansion in the market has slowed as companies exercise greater caution. However, the emergence of clusters of high-quality, attractively priced office buildings in Shenyang is drawing companies to the city. Most recently, there has even been a trickle of relocations from Dalian, where rents remain relatively high. As Shenyang’s office market continues to mature and economic conditions improve, we expect to see more companies select the city as the location of their Northeast China regional headquarters, adding to future Grade A office demand.
Shenyang is expected to have ample new Grade A stock to support this future demand. From 3Q 2015 to end-2018, the city’s total office supply is projected to increase significantly, with new Grade A stock expected to be a significant contributor. Prime office developers, such as Hang Lung and China Resources Land, have entered the city within the past decade and have raised the quality of Grade A stock significantly, setting expectations for more to follow in the future.
Evolution of the market The prime office market has evolved since the mid-1990s, when only two buildings – located in the Taiyuan Street area and the Golden Corridor – provided prime office space for MNCs and domestic enterprises. In the past decade, however, a large wave of office construction has swept through the Golden Corridor, and has included the building of Fortune Centre Tower E and North Media International Centre. The overall expansion of construction activity has added a significant amount of supply to the prime office market and has developed the Golden Corridor into the city’s most important prime office hub.
The 2011 completion of Shenyang’s first International Grade A building, the China Resources Building, marked the beginning of a series of higher quality Grade A office projects being delivered in the city. As recorded in 3Q 2015, Shenyang had 13 Grade A office buildings totalling approximately 820,000 sqm of stock in the market. This figure is forecast to rise to some 1.3 million sqm in 2018.
Office
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Rise of the modern shopping mallUnlike major cities such as Beijing and Shanghai, department stores in Shenyang such as Xinglong Department Store (Happy Family) and New World Department Store remain among the dominant players in the market. However, this is changing for several reasons. Firstly, local residents and nearby consumers are increasingly becoming accustomed to shopping at modern malls as the supply of new mall projects in the city continues to grow and as people realise that malls have a greater assortment of quality products to offer at more competitive prices. Secondly, department stores sales are declining and are projected to continue this pattern as stored-value cards become even more widely unpopular due to ongoing anti-corruption efforts to curb excessive spending. Thirdly, the recent build-up of Golden Corridor has enabled the area to emerge as a key retail hub, with The MixC serving as a popular mall attraction. With everything from fast fashion to luxury, a plethora of branded merchandise is found in Shenyang, which draws consumers from throughout the city as well as nearby towns. Among the biggest draws in the city is Apple, which opened its second store in Shenyang in January 2016, after entering the city in 2015; fast fashion brand Uniqlo has also done well to expand quickly in the local market. The brand’s popularity with younger shoppers has since enabled it to open 10 store locations in Shenyang since entering the city in 2009.
However, the poor retail climate coupled with the continued downturn in luxury and competition from online retail remains a serious problem for the city’s oversupply condition. High market vacancy is not projected to fall significantly over the forecast horizon as a
steady wave of new supply adds to upward pressure on the vacancy rate in the coming years. New supply in Shenyang is set to grow by almost a quarter from 3Q 2015 to end-2018, with shopping mall stock increasing by more than a third over this period. By comparison, department store stock will only rise by less than a tenth during this time. As some 1.3 million sqm of stock is set to enter the market in the coming years, the planned construction is set to leave the city with a total supply of some 6.7 million sqm by end-2018.
However, while the current situation paints a picture of an increasingly tough and competitive market ahead, we remain confident that destination projects with strong tenant mixes – focused on F&B and the kids’ sector – will be able to leverage the spending power of a growing consumer class in Shenyang. This will still allow strong players to outperform in the market.
Retail features of the city Largely concentrated in the traditional shopping areas of Shenhe, Heping, Tiexi, Huanggu, and Dadong districts, Shenyang’s retail market has quickly expanded to include new shopping centres constructed in Hunnan and Shenbei in the past decade. Top retail brands are primarily located in and around Taiyuan and Zhongjie streets, and the Golden Corridor, while secondary retail brands are mainly found in the Beihang Street and Tiexi Square areas.
Since the rise of modern retail in Shenyang, demand for consumer goods and services has been regionally strong. Despite the high market vacancy rate since 2011 and following dramatic increases in supply, retail demand in the city remains relatively high. Notably in the past decade, chain stores, hypermarkets, community shopping centres, and convenience stores have all experienced major growth in popularity among local residents.
Retail
17Shenyang City Profile
With a strong heavy industry concentration specialising in mainly automotive and components manufacturing, Shenyang’s industrial sector has experienced rapid growth over the past decade. The sector contributed RMB 316.5 billion to the economy in 2014, the highest total in all of Northeast China. The government continues to support the industrial sector by providing tax relief for investing companies and consistently upgrading the local infrastructure. This, coupled with the city’s strategic location, has encouraged a number of MNCs, including BMW and General Motors, as well as domestic companies to set up and expand manufacturing facilities in Shenyang.
More than 40% of warehouse stock in Shenyang – over 500,000 sqm of stock – is located in Tiexi District, as warehouses here play a major supporting role to manufacturers in the city. This is also true in Hunnan District, where nearly 30% of the city’s warehouse stock is located. While these two districts serve as the backbone for logistics activity in Shenyang, the emerging Shenbei District and Sujiatun Area submarkets have been growing since 2012, together accounting for nearly 30% of the city’s warehouse supply.
Less sophisticated than Tier I city warehouses in Beijing and Shanghai, the quality of local warehouses differs from project to project. The highest quality projects in the city have come online within the past three years and include projects such as Yupei Shenbei Logistics Park and GLP Warehouse Hunnan Phase I. As the market continues to mature, we expect more quality warehouses to enter. Among them, GLP Vailog Tiexi Logistics Park and Ping An Logistics Park are planned over the forecast horizon. Similar to other cities across China, the e-commerce boom is also driving demand for warehouse space, with JD.com, Jumei.com, and Deppon Logistics Company serving as key tenants in this area.
Strength in manufacturingShenyang’s position as a regional transportation hub in China and its strong manufacturing base has supported growth in logistics. Approximately 1.2 million sqm of warehouse space exists currently and this amount is projected to grow to 2.3 million sqm by 2019. Demand has historically come from traditional retailers in support of Shenyang’s uniquely strong physical retail market. However, third party logistics companies (3PLs) and e-commerce firms have expanded aggressively in recent quarters as physical retail slows.
Shenyang has seven industrial development zones, which are mostly located in the suburban areas of the city. Shenyang’s Economic and Technological Development Area in Tiexi District generates the most industrial activity within the city. A number of MNCs have plants in the area, including Coca-Cola, Michelin, and General Motors. More recently, BMW announced plans for the construction of an engine factory in a joint venture with Brilliance Automotive, which is expected to start operations in 2016 with a designed production capacity of 400,000 cars annually. Meanwhile, other key future projects include Shenguoji, which is scheduled to open in Yuhong District in early 2016 and add more than 300,000 sqm of warehouse space. Also, in emerging Sujiatun Area, some 265,000 sqm of new supply is set for completion by 2019.
Industrial and Logistics
Future High-End Residential Supply by District (2016-2018)
New Units
0 5,000
10,000 15,000 20,000 25,000 30,000
Huanggu Hunnan Shenhe Heping Tiexi Dadong Yuhong
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Rising income levels and an increasing appetite for investment led to the rapid development of Shenyang’s residential sector. Similar to other Tier 1.5 cities, overcapacity from the construction wave of the early 2000s left pockets of unsold inventory in the city. Average prices in the overall market felt pressure from unsold inventory, falling around 10% from their 2012 peak to approximately RMB 6,500 per square metre in late 2015.
New demand for housing has traditionally been driven by the manufacturing sector, with workers from throughout Liaoning Province relocating to Shenyang. Over the years, this has led to more projects being built in the suburban areas near factories. Residential projects in the city centre, especially the CBD, have the highest prices in the city. This is because the area features a growing service sector and also the best educational and medical resources in the city.
In recent years, developers have been most active along the Golden Corridor. As developable land has become scarcer towards the city centre, a number of high-end residential projects have also started
emerging around new development zones and industrial clusters. Tiexi District, Shenyang’s main industrial base, has seen more than 38,000 high-end units launched in the past five years, the second-most of any district. Demand in this area has benefitted from the arrival of foreign manufacturers, such as BMW, as managers prefer to live close to their workplace.
Source: JLL Research
Residential
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19Shenyang City Profile
Special thanks to Linda Yu, Maggie Wang, and Sean Linkletter for their contributions to this report.
Hunnan District and Huanggu District will see large increases in residential stock in the coming years. These areas currently transact at low prices due to their remote location and limited access to public transportation. However, metro line expansion, particularly the construction of lines 9 and 10, will bring more connectivity to these areas. The government has placed an emphasis on redeveloping Hunnan District and plans to relocate some main facilities to the area. Hunnan District also features the Olympic Center Area, which hosted events during the 2008 Olympics.
With modest population growth and slower urbanisation, Shenyang must find new sources of demand to absorb inventory consistently and support growth in home prices. High-quality projects in core areas with convenient transportation, proximity to education, and employment will see the strongest sales velocity going forward. Meanwhile, growth in high-value manufacturing, IT, tourism, and service industries will strengthen demand from owner-occupiers. Additionally, the city’s low prices relative to Tier 1.5 cities should help bolster investment demand.
Golden Corridor is a key area Shenyang is composed of six main residential submarkets; Shenhe, Heping, Dadong, Huanggu, Tiexi, and Hunnan. Most of the existing high-end stock is located downtown in the Golden Corridor of Shenhe District, where prices are higher than any other submarket. The Golden Corridor features development projects by Vanke and China Resources, as well as international developers Kerry Properties, and Lotte. Prices in Heping District, also towards the city centre, are relatively lower, but face headwinds as the district had more unsold inventory at the time of writing. However, this situation could change quickly once the next market cycle picks up.
Michael Wang Managing Director Shenyang [email protected] +86 24 3109 1300
Alex Wang Strategic Consulting Senior Manager Shenyang [email protected] +86 24 3109 1300 ext. 601
Steven McCord Head of Research North China [email protected] +86 10 5922 1371
Carol Lin Research Analyst Shenyang [email protected] +86 24 3109 1300 ext. 605
Jones Lang LaSalle
© 2016 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
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