Chengdu-Chongqing Economic Circle: Commercial Property Market Development Trends
Interview with Gavin Tjong, Managing Director, West China, Cushman and Wakefield
19 April 2022
C H Poon
In October 2020, the Communist Party of China Central Committee and the State Council issued a master plan for the construction of the Chengdu-Chongqing Economic Circle, covering Chengdu, more than 20 districts and counties in Chongqing Municipality and 14 other cities in Sichuan Province. The idea behind it is that it will, through regional connections and co-ordination, develop into a mature city cluster with a full complement of support for industries, and with both Chengdu and Chongqing emerging as modern international cities. Because commercial property (such as office towers, shopping malls, warehouses, and so on) supports many industries in a city, understanding the commercial property market in the Chengdu-Chongqing area will give companies a better grasp of the business and economic development trends there.
HKTDC Research interviewed Gavin Tjong, who is Managing Director, West China, at the leading commercial real estate services company Cushman and Wakefield, about the latest trends in this vibrant market. Cushman and Wakefield has had a presence in the Chengdu-Chongqing area for more than 20 years, and now has branches in both cities. Tjong highlighted some of the major changes and development directions in the Chengdu-Chongqing commercial property market in recent years, and explained how these trends reflect the overall growth of the market.
Describing how a marked trend towards industrial upgrading in the Chengdu-Chongqing area has brought considerable growth to the entire area, Tjong said: “In recent years, under the national policy of upgrading the industrial structure in western China, industries in the Chengdu-Chongqing area have become more advanced and comprehensive. Industries such as electronics and automobile manufacturing, which traditionally have competitive strengths, are now being pushed towards going high-end. The governments in the region are actively bringing in high-tech research institutions and enterprises in the semiconductors, new-energy car and self-driving vehicle sectors. They are also making great efforts to develop new industries, such as biomedicine, aircraft maintenance and green energy. The objectives are to strengthen the real economy and to ensure that industry chains are more complete, environmentally friendly and digitalised.
“This trend in industrial upgrading can also be seen in the logistics industry. We have discovered from our research that, in recent years, new warehouses in the Chengdu-Chongqing area are mostly located at transportation hubs such as airports, railways and highways. Examples include Chengdu’s Qingbaijiang railway port area and the Longquanyi highway port area, as well as Chongqing’s Jiangbei International Airport. Moreover, the warehouses in these districts are mostly high-standard ones—with more floor area, a higher degree of automation and better equipped than traditional warehouses.
“We have also found that Chengdu’s cold-chain logistics industry is developing particularly quickly, and that cold-chain enterprises are snapping up land in Chengdu’s primary land market. These market signals show that the logistics industry in the Chengdu-Chongqing area is upgrading, and that high-end logistics industries involving high-value commodities and cold chains are thriving.”
The office market
As well as undergoing a comprehensive development of its industries, the Chengdu-Chongqing area is also attracting many service providers looking to expand their business. Tjong explained that this has led to demand rising in the office market, saying: “It is apparent from the office market in the Chengdu-Chongqing area that the tertiary sector is now entering a new stage of development. In Chengdu, industries in the internet, telecoms and professional services and in finance have a tremendous need for office space, so rent levels in Chengdu are relatively high. In addition to the central business district in the heart of Chengdu, the market is also paying a lot of attention to Gaoxin District (High-tech Industrial Development Zone) and the Tianfu New Area in the south.
“Rent levels in Chongqing, meanwhile, is somewhat lower. One reason for that is that a number of major corporations bought their own offices when they set up operations in Chongqing, so that lessens the need to rent office space. Currently, the districts with greater demand are mostly in Jiangbei, Yuzhong and Shapingba at the Chongqing city centre. In the next few years, the Central Park area in Yubei District next to Jiangbei International Airport will supply a lot of grade A offices for Chongqing. Because of this, the neighbourhoods of the Central Park area are set to become another business and commercial centre.”
Pointing to other trends in the market worth noting, Tjong said: “After undergoing an adjustment period of several years, the development of shared offices in the Chengdu-Chongqing area is now back on a rising track. This is not only because all industries are now better regulated. More importantly, a lot of start-ups have emerged in the Chengdu-Chongqing area in recent years, indicating the attraction of the huge market of the Chengdu-Chongqing area to entrepreneurs.
“Another major trend is the demand for green offices. When renting office space, many foreign companies are very concerned about the environmental protection facilities of office towers, possibly because these businesses are required to undertake environmental, social and governance (ESG) responsibilities. Analysing these two trends from a macro standpoint, we can see that start-ups and foreign-backed businesses are increasingly looking to gain a foothold in the Chengdu-Chongqing area. This has become a distinguishing feature of the diversified industrial development of the Chengdu-Chongqing area.”
Consumer market expansion
The shopping malls and tourist attractions of the Chengdu-Chongqing area have been frequently featured in social media in recent years because of their distinctiveness. Although the consumer market in the area is expanding rapidly, Tjong advised that businesses should pay attention to several factors when analysing it, saying: “Compared to traditional, mature consumption centres like Beijing and Shanghai, the Chengdu-Chongqing consumer market is still in a development phase, and there is still room for increase in terms of the types and levels of market supply. What we can see now is that both high-end and mass consumption in the Chengdu-Chongqing area have their own solid foundation for development and that there are ample supplies for high-end and mass consumption. But the mid-range consumer market is now catching up fast. This phenomenon is closely related to the industrial upgrading of the area. As the local industries continue to upgrade, more middle-class consumers emerge, and these consumers will have greater demand for middle-class consumption.
“The different strata of the consumer markets in the Chengdu-Chongqing area each have their unique characteristics. Because the area has a large population base and is also the leading consumer market in western China, many high-end brands chose to open their first store, flagship store and concept store there. These brands may open retail stores in commercial blocks with a cultural feature. For example, they might set up their stores in the Kuanzhai Alley, also known as ‘Wide and Narrow Alley’, of Chengdu to add to the cultural ambience. For the mid-range market, the current direction of development is to boost supplies to meet the everyday needs of middle-class consumers. Therefore, in emerging commercial districts such as Gaoxin District in Chengdu and the Central Park area in Chongqing, new shopping malls are being completed one after another.
“As far as the mass consumer market is concerned, one bright spot is the various consumption patterns designed to satisfy young people’s craving for novelty. Various interesting dining and entertainment premises are now springing up in the area. Some traditional retail businesses are happy to cross disciplines and add beauty and technology elements that appeal to young people. Another bright spot is the expansion of the consumer circle. Against the background of the synergic development of Chengdu and Chongqing with their peripheral cities, many businesses from Chengdu and Chongqing are now tapping the development potential of township consumption and rural tourism. When a Hong Kong company expands into the consumer market of the Chengdu-Chongqing area, it should look at the consumer markets of the peripheral cities as well as those of the two major cities.”
Tjong offered some other suggestions to Hong Kong companies looking to expand into the Chengdu-Chongqing market. Explaining that it is already a closely connected and open market, Tjong said: “Previously, because of transportation and infrastructure constraints, it was not easy to connect Chengdu and Chongqing to the coastal markets. But now the transportation network countrywide has undergone great improvements.
“Furthermore, with the issuing of the National Comprehensive Three-dimensional Transportation Network Planning Outline by the Central Government in February 2021, the Chengdu-Chongqing economic circle (together with the Beijing-Tianjin-Hebei Region, the Yangtze River Delta and the Guangdong-Hong Kong-Macao Greater Bay Area) has become one of the four “poles”, or regional transportation centres, of the three-dimensional transportation network. This indicates that the Chengdu-Chongqing area is likely to merge deeper into the national industrial chain and become an indispensable part of domestic economic circulation1.
“Even more importantly, as the country continues to push forward with the Belt and Road Initiative, the Chengdu-Chongqing area will become a frontier for opening up. According to the plan for building the New International Land-Sea Trade Corridor released by the National Development and Reform Commission in 2019, Chongqing will become a logistics and operational centre while Chengdu will become a key commercial and logistics centre for the country. Together, they will serve as a hub connecting the Silk Road Economic Belt and the 21st Century Maritime Silk Road.
“With the China-Europe Railway Express maturing and with the China-Laos Railway opened for operation in December 2021, western China’s status as a new gateway of opening up, and as a driver of the steady development of international circulation, has become increasingly consolidated. The Chengdu-Chongqing area is set to become an important engine for the economic development of western China. As the development of the Chengdu-Chongqing economic circle advances, the market there will become bigger and the number of industries with a competitive edge will grow. Hong Kong companies intending to expand into the mainland should pay more attention to the latest developments in the Chengdu-Chongqing area and formulate their operational plans as early as possible.”
1 The Outline of the 14th Five-Year Plan for the National Economic and Social Development and the Long-Range Objectives Through the Year 2035 points out that, through measures such as deepening supply-side structural reforms and setting up effective systems to expand domestic demand, China will strengthen the leading role of the domestic circulation to achieve a new development paradigm in which domestic circulation will be the mainstay while domestic and international circulations will reinforce each other. For a detailed analysis of the dual circulation development paradigm, see China’s 14th Five-Year Plan: Key Policies.
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