_'New green and smart city' to be built near Beijing with real estate specialisms in high demand
On April 1 2017, the Central Government announced its intention to establish near Beijing a new administrative region, called the Xiongan New Area (XNA), in order to build a “modern, green and smart city” and alleviate the heavy population and economic burden on the capital.
Through central planning, the government will relocate some governmental functions and people from Beijing; and at the same time, develop green and high tech industries in the area, eventually emulating the success of areas such as Shenzhen and Shanghai.
The designated XNA is situated at the intersection of three counties in Hebei Province, about 130 km south of Beijing. Initially, it will encompass over 100 sq km of land, but will gradually be expanded to over 2,000 sq km, roughly the size of Shenzhen.
Although the area is envisaged to attract over a million people to begin with, this figure is expected to double within 10 years.
"At the onset of these developments, services such as town planning, feasibility studies and strategic advice will be in demand. This will lead to the second phase, which will see services such as valuation, leasing and investment consultancy benefiting from large-scale government requirements and development demand."
Although the immediate market reaction was a rush to buy houses in the area, the government acted quickly, imposing strict purchasing restrictions to discourage speculation. In the long-run, however, the real opportunity in the new zone will be in the commercial real estate market.
Two fundamental conditions support this.
Firstly, policy consistency. Some regional initiatives in the past were less successful because of fragmented local policies and business practices, especially because of conflicting interests.
The XNA, however, was initiated by the Central Government, which is not only planning the area, but will also lead by moving some of its own institutions and departments from Beijing to the XNA.
Government policies, therefore, once formulated, clarified and implemented, will be consistent in the years to come. This will ensure a focused development direction, which bodes well for attracting both talent and businesses. And this, in turn, will benefit commercial real estate development.
A new “modern, green and smart city” is needed to alleviate the heavy population and economic burden on Beijing
Second, the need for infrastructure. The proposed XNA is not adjacent to any major high-speed railways or expressways, and it is some distance away from the nearest international airport. The area is mostly rural at this point, so it does not have the urban environment city dwellers prefer.
There are several aims of the project – to build a new satellite city to absorb some of Beijing’s “non-capital” functions, to incubate its own high-end innovative industries as new growth drivers, and ultimately to evolve into a green, hi-tech manufacturing base.
Eventually we expect to see a period of concentrated infrastructure building in the area, not just roads and pipelines, but also offices, hi-tech campuses, industrial parks and logistics facilities.
At the onset of these developments, services such as town planning, feasibility studies and strategic advice will be in demand. This will lead to the second phase, which will see services such as valuation, leasing and investment consultancy benefiting from large-scale government requirements and development demand.
As Beijing is certain to maintain its status as a financial hub, prime Grade-A offices favoured by multinational financial institutions will not mushroom in the XNA. However, as the Government’s communique indicates, the area will serve as a model for population planning, economic transformation and city building.
As the area currently has a GDP that is just one per cent of Shenzhen’s, it has a lot of catching up to do to match the country’s existing ‘new areas’.
However, this also means that there is tremendous potential for professionals and businesses, including those in commercial real estate, to cash in on the great demand for expertise.
David Ji is Head of Research & Consultancy, Knight Frank Greater China.
This post is part of a series of articles taken from Knight's Frank Global Cities 2018 report, which examines the challenges and opportunities facing the global property investor and the key real estate drivers affecting and influencing global cities, the way we build, and the way we live.
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