Supported by government policies and infrastructure developments, the Greater Bay Area is positioned to become the world’s largest bay area economy in the future, according to CBRE’s latest report, ‘Guangdong-Hong Kong-Macau Greater Bay Area – The Rise of China’s Pioneering City Cluster into the World’s Largest Bay Area Economy’.
The Greater Bay Area comprises nine cities in the Guangdong Province and two special administrative regions—Shenzhen, Guangzhou, Foshan, Dongguan, Zhuhai, Zhongshan, Huizhou, Zhaoqing, Jiangmen, Hong Kong and Macau. Its land area is around 56,000 sq. km and the population exceeds 69 million. It takes up only 0.6% of land and makes up 5% of the total population in China but accounts for 12% of the country GDP, surpassing the economic efficiency of the two other major city clusters in China—Jing Jin Ji and Yangtze River Delta . As the 11 cities further integrate, the Greater Bay Area will put itself in the same league as the three largest bay areas in the world—Tokyo, New York and San Francisco.
Marcos Chan, Head of Research, CBRE Hong Kong, Southern China and Taiwan, said, “The Greater Bay Area has many advantages in place. The area has two world-class financial hubs – Hong Kong and Shenzhen – as well as highly rated airports and seaports. The Belt and Road Initiative and upcoming launch of large-scale infrastructure projects will expedite the flow of talent, capital and goods; lead to growth in high value-added industries; attract more corporations, and bring abundant opportunities to the real estate market.”
THREE GREATER BAY AREA GROWTH MODULES
While the development of the Greater Bay Area will be holistic, there are differentiations in the way and extent that cities will benefit. CBRE believes the Greater Bay Area cities can be categorized in three modules and development stages.
Module 1 Cities: Growth Driven by Supportive Government Policies
Hong Kong, Macau, Guangzhou and Shenzhen will continue to play a leading role in the region’s economic growth by leveraging supportive government policies and existing strengths.
Hong Kong already operates the world's largest offshore renminbi business and financing center. The Hong Kong Stock Exchange ranks seventh in the world in market capitalization. The total amount of capital raised from IPOs in Hong Kong and Shenzhen combined has ranked the highest in the world since 2015.
In addition to its flourishing financial industry, Shenzhen is the epicenter of technological innovations in China and is rapidly elevating its status on the world stage. Partnering with Hong Kong, the two cities could grow to become an international innovation and technology hub.
Guangzhou has distinct geographical advantages as it is located at the heart of major railway lines across the Greater Bay Area. It is also home to many leading educational institutions, producing an abundance of young talent.
Macau is the largest gaming city in the world and will partner with Hengqin Island in Zhuhai to strengthen the tourism sector.
Module 2 Cities: Growth Driven by Spillover Demand
Foshan and Dongguan will emerge as additional growth engines as the cities continue to integrate with Guangzhou and Shenzhen. As land price, rents and labor costs surge in Guangzhou and Shenzhen, Foshan and Dongguan will benefit from spillover demand from companies seeking to relocate or expand. Dongguan and Foshan are already transitioning from a labor-intensive, manufacturing-based economy to one that is increasingly driven by advanced and high-tech manufacturing industries. By 2020, the GDP of each city is estimated to surpass RMB1 trillion.
Module 3 Cities: Growth Driven by Infrastructure Developments
Strategic cross-harbor infrastructure projects will accelerate the growth of western cities and Huizhou. The most prominent development is the Hong Kong-Zhuhai-Macau Bridge, which will connect Zhuhai with Hong Kong and Macau to form a tourism hub offering sightseeing, gaming, theme parks and MICE facilities.
The second most influential infrastructure development is the Shenzhen-Zhongshan Bridge. Upon the opening of the bridge in 2024, the commuting time between Shenzhen and Zhongshan will reduce from two hours to half an hour. The bridge will support the reallocation of resources within the Greater Bay Area and reduce the economic gap between western and eastern cities.
COMMERCIAL REAL ESTATE OPPORTUNITIES
Tom Gaffney, Regional Managing Director, CBRE Greater Bay Area & Hong Kong, said, “The Greater Bay Area represents the growth of a connected economic powerhouse and offers vast business opportunities. Investors interested in the Greater Bay Area should consider two factors. Firstly, investors should look into the city’s prospects: how it will benefit from government initiatives; the ease of travel into and from the city; the potential growth of its tertiary industry, and the expected expansion of its talent pool and population. Secondly, investors should consider the prospects of each commercial real estate sector. As the Greater Bay Area seeks to enhance its high value-added industries, the demand for quality office space will grow, making it the most promising sector for investors. The launch of new infrastructure will energize the logistics sector, triggering stronger demand for warehouses. Population growth and the formation of new travel zones will drive the retail property market.“
Office
Guangzhou, Shenzhen and Hong Kong, which are already home to the headquarters of many Fortune 500 companies, will maintain their status as major business hubs. The vacancy rate of these cities ranges from 5-10%. These cities all have plans to develop new CBDs—Pazhou and International Finance City in Guangzhou, Houhai and Qianhai in Shenzhen and Kowloon East in Hong Kong, with new office supply in the three cities reaching 2.43, 2.07and 0.25 million sq. m by 2022 respectively. New supply will be released in phases and will continue to attract corporations, leading to a sustained increase in occupancy rate and rents.
Dongguan and Foshan currently offer around 2 million sq. m. of quality office space. Some service providers and technology firms have already relocated their headquarters, back-office operations and R&D departments to these two cities. Office rents in neighbouring Guangzhou and Shenzhen have reached RMB140-210 and RMB200-250 per sq. m respectively but rents in Dongguan and Foshan current stand at RMB60-80. The selling price of offices in Dongguan and Foshan is around a quarter of the price of offices in Zhujiang Xincheng in Guangzhou and Futian in Shenzhen, with yields exceeding 5.5%.
Logistics
The Greater Bay Area serves as an important logistics hub for e-commerce. Guangzhou, Shenzhen and Hong Kong already handle the largest flow of goods in the region. However, running logistics centres in these eastern cities is costly, with monthly rents averaging RMB40 per sq. m and rents in Hong Kong reaching around RMB117 per sq. m. The monthly rents of logistics centres in western cities average RMB30 per sq. m. With several major railways and roads launching to connect the eastern and western cities, some logistics operators may consider moving their delivery hubs out west. Logistics parks adjacent to major cross-city railroads and ports are an attractive investment class.
Retail & Hospitality
Hong Kong, Macau and Zhuhai will form a ‘tourism delta’, driving demand for integrated resorts, shopping complexes and MICE facilities. Other cities in the Bay Area are also developing sightseeing and cultural sites, such as Panyu in Guangzhou, Boluo and Longmen in Huizhou, Kaiping in Jiangmen, Taishan and Zhaoqing. These new developments will be a positive force for the tourism industry and give rise to new hotel and tourism-related facilities.
WHERE THE GREATER BAY AREA CURRENTLY STANDS
The Greater Bay Area is already the largest bay area in the world in terms of land area and population. However, to further develop the economy, the tertiary industry needs to be boosted. Tertiary industries currently account for over 60% of the Greater Bay Area economy. This is higher than the proportion in Jing Jin Ji and Yangtze River Delta but compared to the world’s three largest bay areas, which are 80% tertiary industry, its GDP per capita is significantly lower. Some cities such as Zhongshan, Huizhou, Jiangmen and Zhaoqing are still dominated by middle-to-low end manufacturing industries. With the Greater Bay Area steering towards growing its high value-added industries, its GDP per capita is set to strengthen.
What sets the Greater Bay Area apart from other city clusters and bay areas is its two special administrative regions, Hong Kong and Macau. The two cities are unique in their identities, legal and taxation systems, and currencies. This complicates the execution of policies, flow of capital, immigration and business operations. To facilitate economic integration across the Greater Bay Area, these differences need to be addressed in the long run.
Gaffney said, “From an investment perspective, the Greater Bay Area is on track to surpass other well-developed economic zones in China. It offers unprecedented potential for our clients and for CBRE. To leverage the opportunities opened to us, we decided to establish the Greater Bay Area as a new business geography. CBRE currently runs three corporate offices in the region: Hong Kong, Guangzhou and Shenzhen, with numerous site offices across other cities in the region. Our clients have been increasing investments and expanding their business in the Greater Bay Area. By establishing this new business geography, we can better build advantage for our clients and grow our real estate business in the Southern China economic powerhouse.”
Table 1: Comparison of Major City Clusters in China (2017)
Source: National Bureau of Statistics of China, Beijing Municipal Bureau of Statistics, Tianjin Bureau of Statistics, Hebei Bureau of Statistics, Shanghai Bureau of Statistics, Jiangsu Bureau of Statistics, Zhejiang Bureau of Statistics, Guangzhou Bureau of Statistics, Shenzhen Bureau of Statistics, Zhuhai Bureau of Statistics, Foshan Bureau of Statistics, Zhongshan Bureau of Statistics, Dongguan Bureau of Statistics, Huizhou Bureau of Statistics, Jiangmen Bureau of Statistics, Zhaoqing Bureau of Statistics, The Statistics and Census Service (Macao), Macau International Airport Co. Ltd., Hong Kong Census and Statistics Department, Hong Kong Trade Development Council, Central Intelligence Agency, Long Finance, CBRE Research
*2016 data
Source: Guangdong Bureau of Statistics, National Bureau of Statistics of China, Hong Kong Census and Statistics Department, The Statistics and Census Service (Macao), Japan Ministry of Internal Affairs and Communications, World Bank, Deloitte Research, Hong Kong Legislative Council, United States Census Bureau, World Intellectual Property Organization, CBRE Research
(From left)
Marcos Chan, Head of Research, CBRE Hong Kong, Southern China & Taiwan
Tom Gaffney, Regional Managing Director, CBRE Greater Bay Area and Hong Kong
Bahtiyar Tay, Managing Director, CBRE Shenzhen
Amy Yan, Assistant Managing Director, CBRE Guangzhou
The Greater Bay Area comprises nine cities in the Guangdong Province and two special administrative regions—Shenzhen, Guangzhou, Foshan, Dongguan, Zhuhai, Zhongshan, Huizhou, Zhaoqing, Jiangmen, Hong Kong and Macau. Its land area is around 56,000 sq. km and the population exceeds 69 million. It takes up only 0.6% of land and makes up 5% of the total population in China but accounts for 12% of the country GDP, surpassing the economic efficiency of the two other major city clusters in China—Jing Jin Ji and Yangtze River Delta . As the 11 cities further integrate, the Greater Bay Area will put itself in the same league as the three largest bay areas in the world—Tokyo, New York and San Francisco.
Marcos Chan, Head of Research, CBRE Hong Kong, Southern China and Taiwan, said, “The Greater Bay Area has many advantages in place. The area has two world-class financial hubs – Hong Kong and Shenzhen – as well as highly rated airports and seaports. The Belt and Road Initiative and upcoming launch of large-scale infrastructure projects will expedite the flow of talent, capital and goods; lead to growth in high value-added industries; attract more corporations, and bring abundant opportunities to the real estate market.”
THREE GREATER BAY AREA GROWTH MODULES
While the development of the Greater Bay Area will be holistic, there are differentiations in the way and extent that cities will benefit. CBRE believes the Greater Bay Area cities can be categorized in three modules and development stages.
Module 1 Cities: Growth Driven by Supportive Government Policies
Hong Kong, Macau, Guangzhou and Shenzhen will continue to play a leading role in the region’s economic growth by leveraging supportive government policies and existing strengths.
Hong Kong already operates the world's largest offshore renminbi business and financing center. The Hong Kong Stock Exchange ranks seventh in the world in market capitalization. The total amount of capital raised from IPOs in Hong Kong and Shenzhen combined has ranked the highest in the world since 2015.
In addition to its flourishing financial industry, Shenzhen is the epicenter of technological innovations in China and is rapidly elevating its status on the world stage. Partnering with Hong Kong, the two cities could grow to become an international innovation and technology hub.
Guangzhou has distinct geographical advantages as it is located at the heart of major railway lines across the Greater Bay Area. It is also home to many leading educational institutions, producing an abundance of young talent.
Macau is the largest gaming city in the world and will partner with Hengqin Island in Zhuhai to strengthen the tourism sector.
Module 2 Cities: Growth Driven by Spillover Demand
Foshan and Dongguan will emerge as additional growth engines as the cities continue to integrate with Guangzhou and Shenzhen. As land price, rents and labor costs surge in Guangzhou and Shenzhen, Foshan and Dongguan will benefit from spillover demand from companies seeking to relocate or expand. Dongguan and Foshan are already transitioning from a labor-intensive, manufacturing-based economy to one that is increasingly driven by advanced and high-tech manufacturing industries. By 2020, the GDP of each city is estimated to surpass RMB1 trillion.
Module 3 Cities: Growth Driven by Infrastructure Developments
Strategic cross-harbor infrastructure projects will accelerate the growth of western cities and Huizhou. The most prominent development is the Hong Kong-Zhuhai-Macau Bridge, which will connect Zhuhai with Hong Kong and Macau to form a tourism hub offering sightseeing, gaming, theme parks and MICE facilities.
The second most influential infrastructure development is the Shenzhen-Zhongshan Bridge. Upon the opening of the bridge in 2024, the commuting time between Shenzhen and Zhongshan will reduce from two hours to half an hour. The bridge will support the reallocation of resources within the Greater Bay Area and reduce the economic gap between western and eastern cities.
COMMERCIAL REAL ESTATE OPPORTUNITIES
Tom Gaffney, Regional Managing Director, CBRE Greater Bay Area & Hong Kong, said, “The Greater Bay Area represents the growth of a connected economic powerhouse and offers vast business opportunities. Investors interested in the Greater Bay Area should consider two factors. Firstly, investors should look into the city’s prospects: how it will benefit from government initiatives; the ease of travel into and from the city; the potential growth of its tertiary industry, and the expected expansion of its talent pool and population. Secondly, investors should consider the prospects of each commercial real estate sector. As the Greater Bay Area seeks to enhance its high value-added industries, the demand for quality office space will grow, making it the most promising sector for investors. The launch of new infrastructure will energize the logistics sector, triggering stronger demand for warehouses. Population growth and the formation of new travel zones will drive the retail property market.“
Office
Guangzhou, Shenzhen and Hong Kong, which are already home to the headquarters of many Fortune 500 companies, will maintain their status as major business hubs. The vacancy rate of these cities ranges from 5-10%. These cities all have plans to develop new CBDs—Pazhou and International Finance City in Guangzhou, Houhai and Qianhai in Shenzhen and Kowloon East in Hong Kong, with new office supply in the three cities reaching 2.43, 2.07and 0.25 million sq. m by 2022 respectively. New supply will be released in phases and will continue to attract corporations, leading to a sustained increase in occupancy rate and rents.
Dongguan and Foshan currently offer around 2 million sq. m. of quality office space. Some service providers and technology firms have already relocated their headquarters, back-office operations and R&D departments to these two cities. Office rents in neighbouring Guangzhou and Shenzhen have reached RMB140-210 and RMB200-250 per sq. m respectively but rents in Dongguan and Foshan current stand at RMB60-80. The selling price of offices in Dongguan and Foshan is around a quarter of the price of offices in Zhujiang Xincheng in Guangzhou and Futian in Shenzhen, with yields exceeding 5.5%.
Logistics
The Greater Bay Area serves as an important logistics hub for e-commerce. Guangzhou, Shenzhen and Hong Kong already handle the largest flow of goods in the region. However, running logistics centres in these eastern cities is costly, with monthly rents averaging RMB40 per sq. m and rents in Hong Kong reaching around RMB117 per sq. m. The monthly rents of logistics centres in western cities average RMB30 per sq. m. With several major railways and roads launching to connect the eastern and western cities, some logistics operators may consider moving their delivery hubs out west. Logistics parks adjacent to major cross-city railroads and ports are an attractive investment class.
Retail & Hospitality
Hong Kong, Macau and Zhuhai will form a ‘tourism delta’, driving demand for integrated resorts, shopping complexes and MICE facilities. Other cities in the Bay Area are also developing sightseeing and cultural sites, such as Panyu in Guangzhou, Boluo and Longmen in Huizhou, Kaiping in Jiangmen, Taishan and Zhaoqing. These new developments will be a positive force for the tourism industry and give rise to new hotel and tourism-related facilities.
WHERE THE GREATER BAY AREA CURRENTLY STANDS
The Greater Bay Area is already the largest bay area in the world in terms of land area and population. However, to further develop the economy, the tertiary industry needs to be boosted. Tertiary industries currently account for over 60% of the Greater Bay Area economy. This is higher than the proportion in Jing Jin Ji and Yangtze River Delta but compared to the world’s three largest bay areas, which are 80% tertiary industry, its GDP per capita is significantly lower. Some cities such as Zhongshan, Huizhou, Jiangmen and Zhaoqing are still dominated by middle-to-low end manufacturing industries. With the Greater Bay Area steering towards growing its high value-added industries, its GDP per capita is set to strengthen.
What sets the Greater Bay Area apart from other city clusters and bay areas is its two special administrative regions, Hong Kong and Macau. The two cities are unique in their identities, legal and taxation systems, and currencies. This complicates the execution of policies, flow of capital, immigration and business operations. To facilitate economic integration across the Greater Bay Area, these differences need to be addressed in the long run.
Gaffney said, “From an investment perspective, the Greater Bay Area is on track to surpass other well-developed economic zones in China. It offers unprecedented potential for our clients and for CBRE. To leverage the opportunities opened to us, we decided to establish the Greater Bay Area as a new business geography. CBRE currently runs three corporate offices in the region: Hong Kong, Guangzhou and Shenzhen, with numerous site offices across other cities in the region. Our clients have been increasing investments and expanding their business in the Greater Bay Area. By establishing this new business geography, we can better build advantage for our clients and grow our real estate business in the Southern China economic powerhouse.”
Table 1: Comparison of Major City Clusters in China (2017)
|
|
The Greater Bay Area |
Yangtze River Delta |
Jing Jin Ji |
|
Land Area (km²) |
56,000 |
211,000 |
146,000 |
|
Population (million) |
69.6 |
128.3 |
112.5 |
|
GDP (trillion USD) |
1.6 |
2.6 |
1.3 |
|
GDP Per Capita (USD) |
23,000 |
13,000 |
11,000 |
|
Urbanization Rate (%) |
70.3% |
69.0% |
48.7% |
|
Tertiary Industry Output (%) |
64.9% |
54.4% |
58.6% |
Source: National Bureau of Statistics of China, Beijing Municipal Bureau of Statistics, Tianjin Bureau of Statistics, Hebei Bureau of Statistics, Shanghai Bureau of Statistics, Jiangsu Bureau of Statistics, Zhejiang Bureau of Statistics, Guangzhou Bureau of Statistics, Shenzhen Bureau of Statistics, Zhuhai Bureau of Statistics, Foshan Bureau of Statistics, Zhongshan Bureau of Statistics, Dongguan Bureau of Statistics, Huizhou Bureau of Statistics, Jiangmen Bureau of Statistics, Zhaoqing Bureau of Statistics, The Statistics and Census Service (Macao), Macau International Airport Co. Ltd., Hong Kong Census and Statistics Department, Hong Kong Trade Development Council, Central Intelligence Agency, Long Finance, CBRE Research
Table 2: Comparison of Largest Bay Areas in the World (2017)
|
|
The Greater Bay Area |
Tokyo Bay Area* |
New York Bay Area* |
San Francisco Bay Area* |
|
Land Area (km²) |
56,000 |
36,500 |
21,500 |
17,900 |
|
Population (million) |
69.6 |
44.0 |
20.2 |
7.7 |
|
GDP (trillion USD) |
1.6 |
1.9 |
1.7 |
0.8 |
|
GDP Per Capita (USD) |
23,000 |
42,000 |
82,000 |
102,000 |
|
Cargo Throughput (TEU) |
7,499 |
773 |
625 |
237 |
|
Airport Passengers (million) |
200 |
120 |
130 |
80 |
|
Contribution to National GDP (%) |
11.8% |
37.6% |
9% |
4.2% |
|
Tertiary Industry Output (%) |
64.9% |
82.3% |
89.4% |
82.8% |
|
Major Industries |
Manufacturing, technology and innovation, finance |
Automobiles, petroleum, finance |
Finance, real estate, medical and healthcare |
Technology and innovation, professional services |
*2016 data
Source: Guangdong Bureau of Statistics, National Bureau of Statistics of China, Hong Kong Census and Statistics Department, The Statistics and Census Service (Macao), Japan Ministry of Internal Affairs and Communications, World Bank, Deloitte Research, Hong Kong Legislative Council, United States Census Bureau, World Intellectual Property Organization, CBRE Research
(From left)
Marcos Chan, Head of Research, CBRE Hong Kong, Southern China & Taiwan
Tom Gaffney, Regional Managing Director, CBRE Greater Bay Area and Hong Kong
Bahtiyar Tay, Managing Director, CBRE Shenzhen
Amy Yan, Assistant Managing Director, CBRE Guangzhou
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Disclaimer:
Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
