6 August 2014


World renowned real estate services provider Colliers International has recently released a white paper titled The Rise of Qianhai: An Opportunity or a Challenge?, which examines the renowned project which has been touted as ‘Manhattan of the Pearl River Delta’. 
 
The Rise of Qianhai

With total investment of approximately RMB389.8 billion, Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone is positioned as the exemplary zone for RMB internationalisation and financial reform. At present, infrastructure in most part of this zone has entered into the final stage of construction, with the development goal in Phase II about to be fulfilled while Phase III is expected to be carried out as scheduled.
 
“Seventeen out of the twenty two pilot policies in the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone have been substantially implemented,” said Simon Lo, Executive Director, Asia Research and Advisory, Colliers International. “Despite the fact that the finance sector, as one of the pillar industries, is excluded from the 15% preferential corporate income tax rate, the Central Government will introduce more incentives to this sector in order to open a channel for the two-way flow of RMB and facilitate the cross-border flow of RMB.”
 
To date, ten commercial land parcels have been transferred in Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone with the average price varying from RMB8077/m2 to RMB28000/m2.  “This disparity in land price is mainly attributed to two reasons: the location of projects and the fact that the Administration Bureau tends to select prominent developers with healthy balance sheet as illustrated in the restrictive provisions with regard to applicants’ assets and future use of property,” explained Simon.

Oriented transfer of partial land parcels to enterprises headquartered within the zone will help ensure the establishment of industries in Qianhai. As an example, the widely publicised ‘One Excellence’ project developed by Excellence Group not only is the first commercial parcel sold in a bid in the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone, but also the first project to be launched into the market. The project construction is scheduled to begin at the end of 2014 with target completion in 2016, collectively utilising only 3 years from the day they successfully bid the project to final completion and delivery.
 
Partnering for Growth with Hong Kong
 
With comparatively high return rate on investment (ROI), the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone will attract investors who are seeking for long-term rental revenue and higher capital gains. Reports show that Vanke Business Mansion invested by Vanke Group has now realised a rental rate of 100% with average rent at RMB260-280 (US$42-45)/m2 per month. With an estimated selling price around RMB65,000 (US$10,517)/m2, investment yield is forecasted to be around 5%.
 
61% of land (16million m2) in Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone is designated for building office premises, which will help relieve the shortage of land supply in Hong Kong due to its proximity to Hong Kong. At the same time, since Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone is positioned as a pilot zone for RMB internationalisation, Hong Kong will benefit from its ever-increasing RMB businesses bringing significant opportunities for Hong Kong-based enterprises through deeper cooperation.

This high potential for growth has induced corresponding actions from several developers keen to leverage this opportunity. According to Ken Kan, Director of Agency, Colliers International Shenzhen, One Excellence outperforms other office premise projects in the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone from the speed of construction and is estimated to achieve sub-structure of the total development soon. He added that projects undertaken by China Resources Land and HeungKong Supply Chain Management Co., Ltd. are under primary construction while most projects are at the stage of preliminary planning.
 
Reports show that currently more than 10,000 enterprises have moved into the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone, most which are newly registered and will look for office units of over 1,000 m2.

The Shanghai Free Trade Zone
 
Since the official launch of Shanghai Free Trade Zone in September, 2013, many people have been making comparisons between the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone and Shanghai Free Trade Zone. The two, in reality, differs significantly in their target clients. The Shanghai Free Trade Zone focuses on the development of financial innovative businesses while the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone works to benefit local state-owned enterprises as well as Hong Kong-based enterprises.
 
“Not only does the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone
enjoy a favorable position close to Hong Kong, it also serves as an important hub for promoting RMB internationalisation. The joint cooperation of these three locations can mean a thriving financial hub that can match to that of Wall Street in this part of the world,” concluded Simon.