China's skyscraper developers have to pay for their vanity as the frenzy to scale new heights lead to record-breaking vacancies

By Pearl Liu pearl.liu@scmp.com / https://www.scmp.com/business/article/3041474/chinas-skyscraper-developers-have-pay-their-vanity-frenzy-scale-new?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp | December 17, 2019 2:40 PM SGT
China's skyscrapers are making headlines for snaring annual global awards during the nation's economic boom. As the nation's economic growth cools and vacancy rate soars, owners are starting to pay the price for their building frenzy and vanity.
Among the winners are the 93-metre Gala Ave Westside in Shanghai, built by China State Shipping Company and Citic Pacific Group, the 115-metre Changsha Hua Center by Huayuan Property, the 207-metre Leeza Soho in Beijing by Soho China and the 215-metre Maike Center in Xi'an by Xi'an Maike Metal International Group.
Skyscrapers require heavy investments, putting their developers under market pressure to differentiate their buildings from similar high-rise towers to attract tenants and foot traffic, according to Pan Qin, director of the Shanghai studio at UK-based architecture firm Benoy.
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"This actually allows us to deliver more environmentally friendly concepts and designs, instead of just fighting to build one metre higher than others," Pan said. "Still, we see a lot of high towers in China being built to play one role, [which is] to flaunt their [owners'] fortune."
The accolades and pressure are coming at the worst possible time for the industry as property consultants expect little relief in vacancy rates across major Chinese cities, with China's economy growing at the slowest pace in almost three decades.
The average office vacancy rate in 17 cities tracked by CBRE rose to 21.5 per cent in the third quarter this year, already surpassing the forecast at the start of the year. The glut may reach the highest in a decade in most of the cities by the year's end. Vacancy will rise in 15 of the cities, led by Tianjin, where the rate is expected to approach 50 per cent, while Wuhan, Changsha and Qingdao will also see record vacancy rates, CBRE warned.
The 110-storey Ping An International Finance Centre in Shenzhen, the flagship property of Ping An Insurance group, is the fourth-tallest tower in the world, built at a cost of US$1.5 billion. Almost 30 per cent of the office space " with 500,000 square metres (5.38 million square feet) of gross floor area in the offices, retail space and hotels " remained empty in the second quarter, according to property agents familiar with the project.
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China went on overdrive in the construction of skyscrapers during the 1990s as the country's rapid economic development catapulted the economy into the world's second-largest, and made the nation's factories the world's workshops.
The construction boom turned China into the home for 51 of the world's tallest buildings, according to the council, including the 530-metre Tianjin CTF Finance Centre that was completed this year.
The progress has minted billionaires among the country's biggest developers, but also landed some builders and local governments into trouble for corruption and shady land or financing deals.
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China Construction Third Engineering Bureau said it halted the construction on a 636-metre skyscraper in the Hebei provincial capital of Wuhan, according to its October 30 statement, because it was owed "a large amount" of money by developer Greenland Group. The project resumed on December 6, though still behind its 2016 original completion target, Greenland said after negotiating the payments.
The Zhongnan Center in Suzhou was supposed to reach a height of 729 metres. The project has not gone beyond the foundation works after its developer Zhongnan Group kicked off the construction five years ago, according to company statement on October 15.
Given the challenge, builders will need to incorporate creative ideas to market their projects, according to Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institution.
"There are so many office buildings nowadays," said Yan. "Even skyscrapers nowadays need to be with good management, good design to lure companies and retailers, otherwise they cannot achieve the business model, the so-called vertical community and vertical economies, they want to achieve."
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This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.
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