China Businessparks Full Screen

World Winning Cities
Global Foresight Series 2008
Real value in a changing world

China Business Parks
The next real estate opportunity

World Winning Cities • China Business Parks • June 2008 • 2

China Business Parks
The business park sector in China is still in its infancy with a development history of little more
than 10 years. However, the sector is now firmly poised for ‘lift-off’ as the property market
responds to the increasing requirement for high quality decentralised business space.
This paper looks at the short history of the business park market in China, reviews the future
drivers of growth, identifies the likely business park hotspots and assesses how the
development and investment landscape is likely to evolve over the next few years

Executive Summary
business park space in China, which is
China’s emerging business park sector offers
estimated to stand currently at circa 17 million sq
robust demand fundamentals. Strengthening
m, is expected to more than double to close to
occupier demand for high quality business park
Business Parks 38 million sq m by 2010 (based on stock
space in China is being underpinned by the
City Classification estimates in 15 cities). Over 60% of the current
expansion of R&D activities of hi-tech and
stock is located in four cities – Shanghai, Beijing,
pharmaceuticals firms seeking high specification
Prime Markets
Dalian and Guangzhou. A number of other cities
space, by the rapid growth in Business Process
Shanghai, Beijing
such as Chengdu, Suzhou, Xian and Tianjin are
Outsourcing (BPO); and by large MNCs
expected to witness a sharp increase in business
increasingly seeking campus style space outside
Transitional Markets
park activity over the next few years.
of higher cost CBD locations. Demand is being
Dalian, Chengdu
further boosted by the government’s strategy of
Hangzhou, Xian
Jones Lang LaSalle’s research has identified 15
moving the Chinese economy up the value chain
Nanjing, Guangzhou
business park hotspots across China, which we
and its policy of mapping out R&D and BPO
Shenzhen, Suzhou
believe will be the focus of future business park
clusters across the country.
activity over the next decade. We have grouped
First Mover Advantage Markets
these cities into three market types, each group
The real estate development market is now
Tianjin, Jinan, Chongqing
offering different opportunities and
responding to the increasing demand for higher
Qingdao, Wuhan
characteristics for occupiers, developers and
specification, lower cost space with larger floor
investors.
plates in decentralised locations. The stock of

©2008 Jones Lang LaSalle. All rights reserved


Prime Markets
China Business Parks - Real Estate Activity v Risk
Shanghai and Beijing have been the pioneers in
the provision of higher quality business park Investment Risk Index
space. They account for more than one-third of
0.4
Prime Markets
China’s current business park stock and are host
to China’s most high profile parks, notably 0.6
First Mover
•
Caohejing Hi-tech Park and Zhangjiang Hi-tech
• Dalian
Advantage Markets
• Beijing
Shanghai
•
Shenzhen
Park (in Shanghai) and Tsinghua Science Park in
• Chengdu
•
0.8
• Wuhan Xian
Beijing’s Zhongguancun District (China’s ‘Silicon
• • Hangzhou Guangzhou
Suzhou
Valley’). Robust occupier demand in these cities
•
• • Nanjing
1.0
is being supported by the rapid expansion of Tianjin
•
R&D activities, growth in back-offices and the 1.2 Jinan
decentralisation of business activities from CBD
• Qingdao
locations. Shanghai and Beijing are China’s most
• Chongqing
1.4
transparent markets and are currently favoured
Business Park Activity Index
by established players and new market entrants, 1.6
such as Goodman, CapitaLand, Shui On and 0.4 0.5 0.8 1.0 1.2 1.4 1.5 1.6
Frasers Property. Source: Jones Lang LaSalle 2008

Jones Lang LaSalle
business parks sector. The credit crunch
Transitional Markets affecting the US markets in 2008 is putting a new
has identified 15 cities
spotlight on investment opportunities in China,
Dalian, Chengdu, Hangzhou, Guangzhou,
across China where
but the long term impacts on the China business
Shenzhen, Xian, Nanjing and Suzhou are
park investment market remain to be seen.
gradually catching up with the prime markets in
we expect the
terms of the quality of business parks projects.
business park market
So far, there are still very few dedicated business
These cities are developing their niche markets
park developers. Software Park China, which
to differentiate from the prime markets,
to grow strongly
developed Dalian Software Park, is currently the
particularly in BPO activities. Dalian stands out
most active. However, the opportunities offered
amongst the transitional markets; the city has
by the business park market are starting to
become a premier hub for outsourcing and has
attract more domestic players, with companies
one of China’s most developed business park
such as Raycom and TecPark Development now
sectors. Transitional markets are a target for a
entering the market.
number of international and domestic developers
including Ascendas and Software Park China.
There are currently a limited number of projects
Their participation will help to improve quality
on the market that meet international investment
and transparency.
standards, which together with the opaque
business environment have constrained
First Mover Advantage Markets developers’ and investors’ expansion
Tianjin, Jinan, Chongqing, Qingdao and Wuhan programmes. Most investors are currently
currently have lower levels of business park adopting a cautious approach, but they are
activity, but their local governments have universally confident about growth prospects
aggressive expansion plans, and in order to over the next five years.
attract high quality tenants and experienced
developers, they are offering generous
incentives for new entrants. These cities provide
‘first-mover advantages’, with lower land costs
and less competitive real estate environments.
We believe that Tianjin offers the best potential
to develop as a robust business park market,
due to strong government support and the
presence of MNCs.

The business park sector is now attracting
international developers and investors, reflecting
the robust long term demand fundamentals
offered by business parks, as well as due to the
strong competition and tighter regulations in
commercial property. Ascendas, Goodman,
Frasers Property, Shui On and CapitaLand have,
to date, been the most active international
developers. A number of US investors such as
GE, Blackstone, Morgan Stanley and Goldman
Sachs have all expressed interest in the



A Short History of Business Parks
Business Park Evolution

The business park sector in China has evolved from the early industrial zones
which first appeared back in 1980. During the 1980s and early 1990s these
industrial zones largely attracted manufacturing activities. However, as the
1980’s/Early 1990’s
government increasingly focused on developing its high tech sectors, we have
• Factory Buildings
• Light Industrial
seen the gradual emergence of business parks within industrial zones; a trend that
• Storage/Logistics
started in the late 1990s and which has accelerated during the current decade.
Mid 1990’s
• Mid Rise Offices
• Bareshell
provided standard quality space but at
The existence of high quality business park
• Small Scale Office Activities
significantly lower rents compared to CBD
space, as recognized by the international real
Late 1990’s markets. These properties were typically mid-
estate community, can only be traced back to the
to-high rise, with some buildings featuring large
mid 2000s. Nonetheless, today’s business park
• Mid to High Rise Offices
• Standard Spec floor-plates
landscape has been shaped by the several
• Low Cost Office Uses
waves of development over recent years:
• Decentralisation
• More recently, we have seen the emergence of
• R&D Activities
low density campus developments that provide
• During the 1980s, development reflected a
2000’s business park space for larger scale activities
focus on manufacturing activities and initially
• Low Density Campuses and headquarter functions of MNCs. Also,
comprised of self-build factory buildings.
• Higher Spec
stand alone SOHO buildings have begun to
Gradually build-to-suit developments appeared
• Large Floor-plates
appear in business parks; SOHO buildings are
in response to a requirement for greater
• Headquarter Economy
typically less than 4,000 sq m and provide
flexibility
• High Value Activities
space for small to medium size companies
• Consolidation
• From the mid 1990s, industrial zones
Today’s business parks are usually characterised
witnessed their first office developments. They
by a broad mix of building types, all of which
typically comprised of mid rise office buildings,
continue to be built in response to very different
provided to a basic ‘bare-shell’ specification
user requirements, from lower specification semi-
and occupied by smaller scale companies
industrial units to high quality headquarter offices
that compete with the CBD markets in terms of
• The late 1990s/early 2000s saw the start of the
their quality and working environment.
development of decentralised offices, which



Future Engines of Growth
The business park market in China is poised for strong growth, as a number of R&D Expenditure (% of GDP)
macro-economic and business factors combine to produce the conditions for
Japan
‘lift-off’, characterised by strong demand for high specification, low density business
US
space across a number of China’s Tier I and II cities.
EU15

Moving up the Value Chain
UK

China

China is recognized as the ‘world’s more streamlined approval processes. In order to India

manufacturing factory’, a position that it has maintain its competitive edge on a global 0 .0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
established over the last two decades, due to a platform, China industrial policy has shifted Source: OECD Factbook 2007
favourable combination of low cost labour, towards more value-added activities to offset
Registered Patent Numbers
operations and land. However, China is facing rising labour and land costs. Key targets are
Research and Development (R&D), Business
increasing competition from neighbouring
400,000
Process Outsourcing (BPO) and Headquarter
countries, such as Vietnam and India, which are
350,000
now on the radar of foreign manufacturers activities, all of which generate strong demand
300,000
seeking lower cost business environments and for business park space.
250,000
200,000
150,000

A Global R&D Hub -
100,000

From ‘Made in China’ to ‘Invented in China’
50,000
0
1990 1995 2000 2005 2006 2007

Source: China Statistics Office
anticipated as R&D activities reach levels
R&D activities are being actively encouraged
achieved in more advanced economies.
by central government. Since the 9th Five Year
Plan (FYP, 1996-2000), the government has
The business park
To capitalise on China’s R&D potential and
invested hugely in supporting education and hi-
market in China is
improving productivity, an increasing number of
tech industries in order to leverage the
IT and pharmaceutical companies have
capabilities of R&D. Over USD 10 billion has
poised for strong
opened their R&D centres in China. According
been invested by the China Development Bank
growth, as a number of
to Xinhua news, 400 out of the world’s 500
in 2007 alone. This has translated into an
largest MNCs have already invested and
improvement of both labour quality and
macro-economic and
established more than a thousand R&D
innovation capacity. The numbers enrolled in
business factors
centres in China.
university education has increased by eight-
fold over the past 10 years. Moreover, returnee
combine to produce the
The aggressive expansion of MNCs has
Chinese are also contributing to a marked
conditions for ‘lift-off’
resulted in China becoming the third most
improvement in business management skills.
active R&D hub after the US and UK. In a
survey by the Thomson Group and EIU back in
The number of registered patents has
2006 of 165 senior managers, 48% of
increased from 22,588 in 1990 to 352,000 in
respondents declared that China will be the
2007. As a consequence, the contribution of
key market for future R&D activity over the
the R&D sector to the total economy has risen
coming three years, compared to 24% for
to nearly 1.5% in 2007 compared with less
India, 22% for the USA and 21% for Europe.
than 1% 10 years ago. Further strong growth is

Demand Drivers
Benefactors Market Hotspots
Drivers
Beijing
MNCS Shanghai
R&D Activities
Guangzhou
New Set up and Expansion Dalian
BPO Activities
Shenzhen
Chengdu
Regional Headquarters
Xian
Local Companies Hangzhou
Corporate Expansion and Cost
Suzhou
New Set up and Expansion Nanjing
Reduction
Jinan
Tianjin
Industry Positioning
Chongqing
Wuhan
New Business Park Occupiers
Qingdao

BPO activities include IT Services, HR, Customer Services, Operations (e.g. Investment, Legal), Training, Financial and Accounting, Procurement



Initially five cities were authorized as BPO bases
in November 2006 – namely Dalian, Chengdu,
Shanghai, Shenzhen and Xian. These five cities
were subsequently joined by another six cities in
December 2006 – Beijing, Hangzhou, Jinan,
Nanjing, Tianjin and Wuhan. A further three cities
have recently been announced – Changsha,
Guangzhou and Hefei. Other financial support
has also been introduced through a USD 1.3
billion Chinese-Singaporean private equity fund,
which will provide easy financing for hi-tech
companies in these cities.

The government’s proactive encouragement of
BPO activities, together with MNCs’ ongoing global
pursuit of cost-effective locations has resulted in
very strong expansion in the BPO sector, growing
even faster than India (which accounts for almost
for 60% of the global BPO market). According to
joint research by McKinsey and EDS (a leading
global technology services company), the BPO
sector in China will see annual growth of almost
30% with a turnover of USD 18 billion by 2010,
growing to USD 56 billion by 2015.

High infrastructure investment (20% of China’s
total investment is on infrastructure compared to
only 6% in India), the high quality labour supply,
competitive costs and strong government support

Growth in BPO Activities rivalling India have all laid a solid foundation for the future growth
in BPO activities in China. As a result, the country
is expected to win market share from India.
The government aims Business Process Outsourcing (including IT
Services, HR, Customer Services, Operations, e.g.
both to attract global China has already succeeded in developing BPO
Investment, Legal, Training, Financial and
activities targeted at Japan, which accounts for
knowledge based Accounting, Procurement), a primary user of
70% of current business. For example, HP has set
business park space, is actively being targeted as
industries, as well as up a call centre in Dalian to tap into its local
part of the central government’s plan to move the
language skills to service the Japanese market,
foster the organic economy up the value chain. The government
while IBM have announced plans to increase its
aims both to attract global knowledge based
growth of companies Japanese back office operations from 2000 to
industries, as well as foster the organic growth of
3,000 people by end 2008. NEC moved 90% of its
that already have companies that already have operations in China.
BPO business from Japan to China early 2007.
Their specific objectives have been to:
operations in China
The expansion of foreign BPO companies has
• Establish 10 competitive BPO bases across
helped cultivate growth in local BPO service
China during the 11th 5YP
providers. Neusoft, the China market leader in
• Double BPO export volumes between 2005 and
BPO business ranks 25th globally (according to
2010
IAOP); the company employs more than 10,000
• Win BPO business from 100 leading global firms
people and provides BPO services to more than
• Cultivate 1,000 BPO firms with global
30 MNCs in Shanghai, Beijing, Chengdu, Nanjing
certifications
and Shenyang. Isoftstone, another leading
Chinese provider of IT outsourcing services has
BPO bases designated by Ministry of Commerce aligned with Microsoft and will have over 3,000
staff in a business park location in North West
December 2006 December 2007 - February 2008
November 2006 Beijing. Isoftstone is also aggressively looking for
opportunities in Tier-II cities.
Beijing Changsha (December 2007)
Dalian
Hangzhou Guangzhou (January 2008)
Chengdu
Jinan Hefei (February 2008)
Shanghai
Attracting Regional Headquarters
Nanjing
Shenzhen
Tianjin
Xian
Regional headquarters of MNCs have gravitated to
Wuhan
both Beijing and Shanghai since the early 2000s
when the municipal governments offered incentives
Source: Ministry of Commerce



leading MNCs such as HP, GE, IBM, Sony, Dell,
to attract high value foreign investment. At the
Business Park Occupiers
Toshiba, Microsoft, Oracle and Intel. In Shanghai,
same time, large MNCs were actively moving their
Zhangjiang Hi Tech Park is emerging as a
resources and capital globally which translated
Microsoft
pharmaceutical hub, housing companies such as
into a ‘HQ relocation wave’ of the 2000s.
Microsoft is investing heavily in their expansion into China,
Novartis, AZ, GSK and Roche. particularly in R&D activities. Rapid expansion is generating
For example, Alcatel moved its Asia Pacific demand for larger buildings with a better image, good
headquarter from Australia to Shanghai in 2000, transportation and proximity to local universities. Grade-A office

The Next Wave of Business Park buildings in CBD locations no longer meet the needs of
from where it manages 16 Asia Pacific markets
Occupiers
companies, and given its large space requirements, locating in
and 22 subsidiaries, as well as R&D centres in the CBD would significantly increase their occupancy costs.
China; HSBC moved its China headquarters from
Microsoft is currently building a 119,000 sq m campus facility
While the hi-tech industry in particular has driven
Hong Kong to Lujiazui (located in the CBD) in for 6,000 employees in Zizhu Science Based Park in the
the development of many of China’s current
Shanghai in 2000; whilst Kodak relocated its Minhang District of Shanghai; Phase I with a total gross floor
business parks, developers are looking to the
regional headquarter to Shanghai from Hong Kong area of 38,000 sq m was opened in early 2008. Zizhu
Science Based Park provides Microsoft with low-cost land,
next wave of occupiers to shape the future
to serve the whole Asia Pacific market in 2004. strong government support, access to rich human resources
market. The financial services sector is expected and accommodation costs (including rents and property
to increase its presence in business parks as the
At a micro-level, local governments have been management fees), which are estimated to be 70% lower
than in the CBD.
sector matures.
courting headquarter functions due to the twin
benefits of tax revenue and profiling, which has In Beijing, Microsoft is aggressively expanding its R&D
According to the Global Financial Services
encouraged a shift into business park capacity. The company already has several research labs in
West Beijing and is currently building a 101,000 sq m R&D
Offshoring Report 2007 released by Deloitte in
accommodation. It has been estimated that the centre in Zhongguancun (West Zone), due for completion by
2006, over 75% of major financial institutions in
relocation of one manufacturing-based 2010. The new centre, which will be fully owned by Microsoft,
the world had offshore operations compared to
headquarters will stimulate the relocation of will consolidate all research functions in this facility.

less than 10% back in 2001. This trend is
more than 10 related service firms (Dept of In Guangzhou Science City, one of the city’s leading
expected to accelerate over the next few years,
Foreign Investment Administration, Ministry of business park areas, Microsoft (China) Industry Base
and the report highlights that China is likely to be
Commerce, PRC). occupies 300,000 sq m. When complete in October 2008,
the industry base will include a Microsoft Technology Centre
India’s principal offshoring competitor. for South China, an advanced software training centre, a
business operations centre, as well as an international

Corporate Expansion and Cost Such alluring prospects have translated into a software outsourcing industry base.

Reduction quick response from Chinese cities. As a
EMC
forerunner, Shanghai set up China’s first financial
BPO centre in Zhangjiang Hi-tech Park in 2006 EMC, a US Fortune 500 company which designs and builds
Many domestic and international firms that have information infrastructure, has been rapidly expanding
and the Shanghai municipal government aims to
been active in China for several years are throughout China in recent years with huge investment in
create a USD 3 billion financial BPO sector by
recording exponential expansion in both turnover R&D and strategic acquisitions. The company’s Shanghai
2010. Dalian has successfully attracted Fidelity R&D centre is one of their fastest growing R&D centres in
and number of employees, on the back of double- the world. Evolving from a small office in the Pudong District
International, a leading provider of financial
digit economic growth. However, rapid expansion of Shanghai, the R&D centre grew to over 3,900 sq m in just
services, to launch its back-office operations in
is also occurring at a time of rising cost of doing 4 years. As a result of the need to accommodate 200 new
the city. It is also the first foreign fund recruits each year, EMC relocated to a larger 7,500 sq m
business in China, and in an increasingly R&D centre in Shui On’s Knowledge and Innovation
management group in China to set up back office
competitive global market place, companies are Community in Yangpu District, north of the city centre.
functions, reflecting the country’s rising power as
actively seeking ways to reduce their cost base
a financial outsourcing centre.
by reducing real estate costs. In this context,
decentralised business parks offer an attractive
alternative to CBD office space for cost conscious
occupiers. In Shanghai, for example, the CBD v
Business Park Industry Positioning Key Tenants
decentralised rental differential has widened
significantly in recent years, and rents in the CBD Dalian Software Park IT HP, GE, IBM, Sony, Dell, Toshiba
are now three times the levels being paid in Microsoft, Oracle, Intel
decentralised business parks.
Zhangjiang Hi-tech Park Pharmaceuticals Novartis, AZ, GSK, Roche

Business Park Rent vs. CBD Office Rents, Shanghai
14.0 Rent RMB per sqm per day
The Chinese government has established
‘industry guides’ for every business park which 12.0

identifies the type of industry that it can operate. 10.0 Puxi (CBD Area)
As a result, business parks are creating strong
industrial clusters where companies in a similar 8.0
industry are operating in close proximity, creating
economies of scale and encouraging knowledge 6.0
Pudong (CBD Area)
sharing. One of the best examples is Dalian 2.0 Business Parks
Software Park developed by Software Park China,
one of the largest business park developers 0.0
nationwide. The Dalian Software Park has 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
attracted nearly 400 hi- tech companies including Source: Jones Lang LaSalle, 2008



We believe that these 15 cities will set the
benchmark against which future business park
performance and activity will be measured.

Distribution of Business Park Stock

Of the current estimated business park stock of
approximately 17 million sq m in China over 60%
is concentrated in four cities, each of which has a
business park stock of over two million sq m:

Shanghai has China’s largest stock of business
park space at over three million sq m. The high
concentration of MNCs in Shanghai has
contributed to the emergence of back-office and
R&D activities. Shanghai’s two most developed
business parks, namely Caohejing Hi-tech Park
and Zhangjiang Hi-tech Park are now amongst
China’s most high profile business parks.

The Geography of Business Parks
Beijing is also one of China’s largest business
park markets, with a stock of around three million
sq m. Its business park market has grown on the
back of the city’s R&D activities and university
Jones Lang LaSalle has identified 15 cities across China where we infrastructure. Its premier business parks are Z-
expect the business park market to grow strongly due to the Park and Tsinghua Science Park.

combination of government policy, robust demand drivers, critical mass Dalian is China’s third largest business park
of business park activity and the presence of high quality occupiers market, which has grown on the back of BPO
activities. Dalian Software Park Phase I has been
active for a decade and has become a premier
hub for IT outsourcing.
They comprise of 12 cities that have been
identified as BPO hubs by central government,
Guangzhou’s business park market first
namely: Beijing, Dalian, Chengdu, Guangzhou,
emerged in the Guangzhou Economic and
Hangzhou, Jinan, Nanjing, Shanghai, Shenzhen,
Technological Development District. Its
Tianjin, Wuhan and Xian.
estimated 2 million sq m stock positions
Guangzhou as the fourth largest market after
We have also added a further three cities to our
Beijing, Shanghai and Dalian.
analysis; cities that are also now appearing on
the radar of business park occupiers and where
The future supply pipeline indicates that the stock
development suggests an active business park
is expected to more than double by 2010 to close
market emerging: Chongqing, Suzhou and
to 38 million sq m. Whilst the four largest markets
Qingdao.

Business Park Stock Business Park Stock 2010
Business Park Stock 2008
Stock 2008
>2 million sq m
Shanghai, Beijing, Dalian, Guangzhou

38.8% 40.3%
61.2% 59.7%
700,000-1 million sq m
Suzhou, Nanjing, Chengdu, Tianjin Other Cities Other Cities
Jinan, Hangzhou Shanghai, Beijing, Shanghai, Beijing,
Dalian, Guangzhou Dalian, Guangzhou
500,000-700,000 sq m
Shenzhen, Xian

<500,000 sq m
Qingdao, Chongqing, Wuhan

Total Size: 17 million sq m (est) Total Size: 38 million sq m (est)

Source: Jones Lang LaSalle. Updated as April 2008



China Business Park Hotspots
Prime Markets

Shanghai
Shanghai has been China’s market pioneer in the
business park sector, with a development history of more
than 10 years. The high concentration of MNCs in the city
has directly contributed to the rapid expansion of back-
offices and R&D centres in Shanghai’s business parks.

Beijing • • Dalian
• Tianjin
Amongst the most well-known business park
developments in Shanghai are: Caohejing Hi-tech Park,

• Qingdao
Zhangjiang Hi-tech Park, Knowledge and Innovation

Jinan •
Community, Jinqiao Export Processing Zone, Shibei
Industrial Park and Zizhu Science Based Park.

• Nanjing
• Xian
Infrastructure improvements have played a crucial role in

Suzhou •
the successful development of these parks and most are

Hangzhou •• Shanghai
built close to public transportation links.

• Chengdu Wuhan • As China’s most mature real estate market, Shanghai’s

• Chongqing
business parks have witnessed every phase of the
sector’s evolution and they provide a good illustration of
how the business park landscape in China has changed
in recent years. For example, Caohejing was originally a
cluster of light industrial factories, but is now

Guangzhou • Shenzhen
•
transforming into a modern business park with several
high quality projects under construction.

Current business park occupiers in Shanghai are mainly
high-tech companies and company back-offices. Over
the next few years, the bulk of new demand is expected
to originate from companies that are aggressively
planning to expand in the city. The demand for large
space, the need for consolidation, combined with the
limited choice and rising costs in the CBD are expected
decentralisation trends are driving the market, to be the main drivers for corporate relocation to the
Demand Dynamics city’s business parks.
resulting in a complex occupier mix. In Tier II cities,
government initiatives in mapping out a city’s
Beijing
City Headquarters
R&D BPO
economic focus are important drivers of demand.
Shanghai High
High High The business park sector in Beijing has emerged primarily
We have reviewed future demand prospects on the back of the city's role as a major R&D hub supported
Beijing High
High High
by the high concentration of university institutions.
based on an assessment of a city’s potential in
Dalian Low
Low High
terms of prospects for three main occupier Zhongguancun Technology Park (ZTP) is China’s largest
Guangzhou High
Medium High business park. It comprises a central park in Haidian
activities - R&D, BPO and regional headquarters. District and 9 sub-parks featuring several different
Shenzhen High
Medium High
industries. A number of notable high-tech MNCs have set
up their global R&D centres in ZTP, such as Motorola,
Hangzhou Medium
High Medium
Shanghai and Beijing China’s Prime Markets, Ericsson, Nokia and Siemens. Large local large firms have
Xian both perform well across all demand activities,
Medium
High High also boosted business park demand – notably Sohu which
occupies 13,000 sq m in Tsinghua Science Park in ZTP,
indicating strong and robust demand for
Chengdu High
High High UFIDA which occupies around 180,000 sq m in Shangdi
business park space. Robust occupier demand YongFang Base, and Lenovo with its Chinese
Nanjing Medium
Medium Medium
headquarters and R&D centre opposite Z Park in Shangdi.
in these cities is being supported by the rapid
Suzhou Medium
Low Medium
expansion of R&D activities, growth in back- Other key business park areas include Electronic City
Wuhan Low
High Medium (digital, electronic, telecommunications etc.) and Beijing
offices and the decentralisation of business Economic-Technological Development Area (high-tech and
Tianjin Low
Medium Medium
activities from CBD locations. pharmaceutical industries). Emerging areas include
Daxing Pharmaceutical Park (south of the city centre) and
Jinan Low
Medium Medium
the airport precinct (Beijing Capital Airport) which is
Chengdu, Xian, Hangzhou, Guangzhou and
Qingdao Medium
Medium Low growing quickly with substantial developments, such as
Shenzhen also score well on demand drivers. the MAX business park in Tianzhu EDZ. The new light rail
Chongqing Low
Medium Low lines, due to be operational by 2015, will aid rapid transit
Although Dalian is not especially strong in R&D movement between the airport precinct, BDA, Fengtai,
or regional headquarter activities, its BPO sector Zhongguancun and Daxing.
Source: Jones Lang LaSalle
is renowned as the market leader in China, with End-user demand is strong with MNC occupiers seeking
will continue to account for the majority of new 620 BPO firms employing 50,000. Labour large stand-alone properties both for purchase and lease.
Local companies are generally looking to purchase
development, some of the largest increases in shortages and increasing costs have properties and their requirements are small (typically 500-
stock are expected to occur in Chengdu, Suzhou, constrained Dalian’s progress up the value 5,000 sq m stand-alone buildings in campus style
business parks on the city fringes).
Xian and Tianjin. chain, but we nonetheless believe that with
strong performance in the BPO sector, Dalian The ongoing ‘greening of the city’ is pushing more
manufacturing firms out of the city which are being
will be continue to be the market leader in
Strong Demand Dynamics
replaced by higher value industry. As a result business
entering the next wave of business park activity parks are witnessing rising demand particularly from the
R&D, pharmaceuticals and hi-tech sectors.
focused on financial services.
The future demand potential for business park With the emergence of private developers and the entry of
Tianjin and Qingdao that have largely developed
space in each city is the result of a complex experienced developers such as Raycom, CapitaLand and
Frasers, the Beijing business park market is expected to
interaction between sector prospects at a macro from manufacturing bases have lagged the other grow quickly and the standard of accommodation and
level, and the relationship between CBD and cities in terms of business park activity. However, amenities is expected to rise over the next 2-3 years.

decentralised office space at a micro-level. In their governments are keen to catch up and are
prime markets such as Shanghai and Beijing, aggressively setting out master plans.




• Xian
• Dalian Renowned as one of the premier education hubs in China, Xian is a city with rich human
Dalian is China’s third largest business park market and has been a pioneer in business park
resources and low labour costs. To leverage its inherent advantages, the Xian municipal
development – its first business park project was completed in 1998. The market is mainly driven by
government has targeted BPO as a key growth sector. A 400,000 sq m software park has
BPO activities. Most of the back-offices in the city have been set up to cater for the requirements of the
been built to cater for the needs of BPO businesses. The Xian Software Park is currently
Japanese and South Korean markets. Now more than 2,000 Japanese firms have expanded their
home to 20 BPO companies, which mainly provide back-office processing for industries such
technical support centres into Dalian – including Panasonic, Sony, Hitachi and Toshiba. Total investment
as IT, healthcare and financial services. Companies such as Oracle, SPSS, Sybase,
from Japan reached USD 4.2 billion, which is roughly 10% of total Japanese investment in China.
Neweggs, Infineon, NEC and Applied Materials are present in Xian Software Park. In addition,
CompuPacific International (an American-Chinese outsourcer) has created a BPO and call
Dalian Software Park, with a total floorspace of more than one million sq m has become one of the
centre in a software park deal with New China Life Insurance. To tap into the booming market,
most high profile BPO parks in China – five out of the top 10 global BPO providers located in the park.
Xian Hi-tech Zone has invested USD 430 million to develop a large BPO base with total space
BPO providers include IBM Global Services, Accenture, BearingPoint, NEC and HP.
exceeding one million sq m.

• Hangzhou
The entrance of large developers such as Ascendas and Shui On Group are expected to improve
market transparency and provide new high quality projects. In 2007, the Shui On Group and
Dalian Yida Group launched Dalian Tiandi Software Hub (DTSH), a mixed-use project of 3.5
The business park market in Hangzhou has developed from the cluster of universities (similar
million sq m with a 10 year development phase.

• Guangzhou
to that of Beijing). The Hi-tech Development Zone in Binjiang District (one of the university
areas in Hangzhou) has traditionally hosted most business park projects. The Hangzhou
Economic & Technological Development Zone in north east Hangzhou is emerging as a new
business park location.
The market in Guangzhou first evolved in the 1980s from the manufacturing base of Guangzhou
Development District (GDD). Today GDD includes several comprehensive business park areas –
Singapore Science Park, developed jointly by Ascendas and Hangzhou Economic
notably Tianhe Software Park, Haizhu and Panyu areas and Guangzhou Science City. The city’s two
Development Area Administration, is located in Xiasha satellite town. With a total GFA of
million sq m stock positions Guangzhou as the fourth largest market after Beijing, Shanghai and Dalian.
430,000 sq m, the park is expected to host several hundred IT companies and up to 50,000
industry professionals when completed in five to eight years.
The main business park areas all have a high concentration of quality occupiers. For example,
Microsoft (China) Industry Base occupies 300,000 sq m in Guangzhou Science City; the industry
Alibaba, which was founded in Hangzhou, announced the development of its Chinese
base includes a Microsoft Technology Centre for South China, an advanced software training
headquarters, to be located in Binjiang Hi-tech Development Zone with a total site area of
centre, a business operations centre as well as an international software outsourcing industry base.
59,000 sq m and employing 9,000 staff when completed in 2009. Huawei Technologies, a
Intel’s International Data Security Solution Centre has committed to a 70,000 sq m development in
leading Chinese telecom equipment provider, has built a global research and development
Guangzhou Hi-tech District, providing accommodation for 6,000 employees.
centre in Hangzhou with a total area of 250,000 sq m.

• Nanjing
In order to attract more companies in secondary and tertiary industries, GDD is offering
incentives of up to USD 2.7 million to companies who set up their headquarters in the District.
We expect that government incentives and industry synergies will underpin the strong growth of
Nanjing Jiangning Science Park and Nanjing Hi-tech Park provide most of the high quality
Guangzhou’s business park market.

• Shenzhen
business park space in the city. Centrally managed, large-scale business park projects did not
appear in the city until 2005 and rents are relatively low at around USD 50 per sq m pa, compared
to USD 157 per sq m pa in Shanghai. Major tenants include Nobel, Samsung and Honeywell.
The business park market in Shenzhen emerged in the late 1990’s, anchored by the
Satyam, the fourth largest IT company in India, attracted by Nanjing’s skilled labour force and
establishment of the 11.5 sq km Shenzhen Hi-tech industry Park (SHIP). Located in SHIP, the
competitive costs, has signed an agreement with Nanjing Hi-tech Park to set up a global delivery
600,000 sq m Vision (Shenzhen) Business Park (VSBP) is considered to be the highest quality
campus (GDC). It will be the Satyam's largest development facility outside of India. The Nanjing
business park project in the city.
facility will include areas devoted to development and training as well as a convention centre.
Owned by Frasers Property (a joint venture between Fraser & Neave and Ascendas), VSBP has
Nanjing’s municipal government is very keen to develop a niche BPO market in the city
been developed in three phases. Phase I (23,500 sq m) and phase II (121,300 sq m) came
targeting the North American market. Aggressive investment in infrastructure and residential
online in 2001 and 2006 respectively, while phase III (with a total investment exceeding USD 20
accommodation is expected to support growth in the business park sector.
8million) was started in H2 2007. More than 30 well-known high-tech firms occupy space in

• Suzhou
VSBP, including Huawei, Zhongxing, Lenovo, Microsoft, TCL, Philips and Epson. As a result of
strong demand, the vacancy rate has fallen to 10%. The developers’ ambition is to transform
VSBP into a ‘World Class R&D Centre’.

• Chengdu
Suzhou SIP and Suzhou New District have been the dominant players in the high tech office
market to date. Supply is expected to grow significantly in the coming years with the
opening up of new areas, such as the Wuzhong and XiangCheng Districits. Yangtze River
Business Park and SISPAPK Phase 5 with a combined GFA of 1.7 million sq m will provide
The business park sector in Chengdu emerged in 2000, when the government built a number of
the majority of future supply.
office buildings in its industrial zones to attract small high-tech companies. From 2004, supply
increased significantly due to the government’s initiative to support the IT industry.
Most business park occupiers come from companies who have set up manufacturing bases in
Suzhou, including tenants such as Cisco, Oracle, Canon, Philips and Asus. The city will
The high-tech office market in Chengdu currently totals around 750,000 sq m, with tenants
continue to benefit from spill over from neighbouring Shanghai. However, rising wages and a
mainly comprising international high tech companies. For example, Tianfu Software Park,
shortage of skilled labour have put pressure on business park development in the city. Hero
developed by Chengdu Hi-tech Investment Company (a government investment company) has
Mindmine’s (India’s largest BPO training organisation) recent arrival in Suzhou should help to
successfully attracted IBM, Nokia, Synnex and NEC, with average occupancy reaching around
alleviate the problem. The new training centre in Suzhou Industrial Park aims to provide 5,000
1,000 sq m. For example, Nokia occupies 10,500 sq m in Tianfu Software Park and Accenture
senior BPO professionals over the next 3 years, which will be a key factor in Suzhou’s ability
plans to occupy 4,000 sq m in Tianfu Software Park Phase II by mid 2008.
to attract more BPO firms.
Chengdu’s large talent pool (with annual graduates reaching 105,000 compared to 110,000 in
Shanghai), strong government support and industrial clustering of software, IC and
telecommunications firms, continue to attract companies such as Flextronics, French Ubisoft, and
Kingdee. The business park stock is expected to rise to well over one million sq m by 2010.



First Mover Advantage Markets Locations

• Tianjin
There is not yet an established business park market in Tianjin. Most business park space is
randomly located in the Huayuan and TEDA areas – Huayuan is the most developed area with two
400,000sq m phases completed and another 600,000 sq m scheduled for future development.

The situation is gradually changing as central and local government support increases. Several high
quality projects are in the pipeline – Tianjin Binhai Service Outsource Industrial Park Phase 1 in TEDA
(developed by Software Park China) will contribute 100,000 sq m of high quality space in 2008, while
local residential developer Tianjin Xinhua Investment Group will develop 200,000 sq m in 2008.

Despite the late start, Tianjin’s municipal government has very aggressive plans to win new
business. The value of the BPO sector is anticipated to reach USD 4 billion by 2010 and the
municipal government plans to allocate USD 6.8 million every year from 2007 until 2010 to fund
talent training programmes relating to the BPO sector. It is likely that Tianjin will be a future star in
the business park sector as the high concentration of MNCs in the city will contribute to the
development of back-office and R&D functions.

• Wuhan
Wuhan is renowned as the ‘Optical Valley of China’ with its intensive research activities.
Microsoft, IBM, Bearingpoint, Accenture, NTT and some domestic outsourcing companies, such
as Beyondsoft, iSoftStone, and KMsoft have established their bases in the city. Infosys, India’s
largest outsourcing company, will move into Optical Valley in 2008. EDS, one of the world’s largest
IT outsourcing service providers, has built a global service centre in Wuhan Optical Valley Park.

Despite high quality tenants, the size of the business park market is relatively small as most
tenants occupy around 100-300 sq m. To differentiate from other cities, Wuhan is repositioning
itself as ‘China's Delivery Centre of Outsourcing Services’, mainly focusing on subcontracting.

Beijing • • Dalian
For example, EDS’s GSC in Wuhan will take subcontracted services from Shanghai, in addition to

•
taking orders directly from Europe and North America.

• Chongqing Tianjin

Jinan • • Qingdao
In Chongqing, there are two industrial parks focusing on the IT and electronics industries, namely
Xiyong Microelectronics Park and New Hi-Tech Park. These parks are characterised by suburban

• Nanjing
• Xian
settings, lower-density buildings and are in close proximity to major transport links. Large

Suzhou •
international high-tech firms such as HP, ProMOS Technologies as well as renowned domestic

Hangzhou • •
companies such as Kingdee Software have either leased or bought office and R&D space in these

Shanghai
two business parks.

• Wuhan •
• Qingdao Chengdu
• Chongqing
The business park market in Qingdao has a relatively short development history of only 2-3 years.
Qingdao Software Park is the main provider of high quality space with Phase I providing 260,000
sq m. Phase II will be developed in five buildings totalling 115,000 sqm.

Several high quality tenants have been active in the market such as Microsoft, Resource Pro

Guangzhou • Shenzhen
(US), Softbrain (Japan),Trial (Japan) and Interpark (Korea). The Qingdao government is very

•
ambitious and has allocated a 10 sq km land area in Aoshan (located in Jimo District) to cater for
the software industry. However, land in this area has been designated for commercial use rather
than industrial use.

• Jinan
The business park market in Jinan emerged relatively early (in 1997) when the municipal
government provided support to the hi-tech industry. Intellectual Property (IP) protection has been
a key factor in the development of Jinan’s business park market, and has enabled Jinan to
become the second largest IP base in China after Chengdu. The city’s IP protection record has
attracted some 500 top enterprises such as Microsoft, Oracle, LG, Panasonic, Suzuki, NEC, Texas
Instruments and Sanyo. Currently, Jinan Hi-tech Industrial Development Zone and Qilu Software
Park provide most of the high quality business park space in the city.


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