Shenzhen has been described as the primary growth node in the Greater Bay Area (GBA) due to its concentration of highly creative and technologically advanced industries, which could help boost economic development in related businesses and industries, according to international property consultancy JLL.
According to JLL's recently published The Greater Bay: the Road Ahead whitepaper, Hong Kong is expected to be one of the main drivers to lead the GBA's next stage of growth, which necessitates the creation of financial and professional services. Lusail | lusail Qatar | property hunter
The creation of a strong service sector, especially financial and professional services, will be required for the GBA's next stage of growth. This will be Hong Kong's most important role: to serve as a regional gateway to global capital markets for Mainland Chinese firms. From September 2019 to February 2020, 17 Guangdong-based companies applied for initial public offerings (IPOs) on the Stock Exchange of Hong Kong (SEHK), compared to 15 on the Shanghai and Shenzhen Stock Exchanges. This demonstrates how the option of launching an IPO via SEHK provides much-needed financing to Mainland Chinese companies in the GBA.
JLL's Managing Director in Hong Kong and Chief Operating Officer in Greater China, Gavin Morgan, says: "The demand for offices will be supported by Hong Kong's continued position as a financial center. Due to the efficiency of transportation, offices near the West Kowloon High-Speed Rail Station are considered to be a new priority. Critical functions such as finance, analysis, and marketing will be housed in Hong Kong for GBA companies in the tech and manufacturing segments looking to compete for market share on the global stage. The Lok Ma Chau Loop Innovation and Technology Park, located halfway between Hong Kong and Shenzhen, will expand the region's lodging options."
Beyond the three core cities (Hong Kong, Guangzhou, and Shenzhen), three significant city clusters are expected to drive development in the next five years: Hong Kong-Zhuhai/Macau-Shenzhen, Shenzhen-Zhongshan, and Shenzhen-Dongguan-Guangzhou-Foshan.
"We will see a new round of urban expansion and industrial transfers in the area as connectivity improves and economic links between cities strengthen. It will build opportunities for developers and property investors by the demand for various property sectors "Nelson Wong, JLL's Greater China Head of Research, agrees.
Opportunities for investment in the GBA
Three sea-crossing bridges will link the Pearl River's east and west banks. The Shenzhen-Zhongshan Bridge, according to JLL, will assist Zhongshan in attracting more logistic facility growth, which is becoming increasingly unprofitable in Shenzhen due to limited land supply. Meanwhile, some Shenzhen manufacturers are considering relocating their factories to Zhongshan, and jobs will follow. The housing market in Zhongshan is expected to boom, providing developers with plenty of opportunities.
Shenzhen will be able to accommodate more high-value operations such as R&D and smart manufacturing thanks to the outflow of lower-end manufacturing.
Improved connectivity between cities would also support the retail and tourism industries. Shenzhen is on its way to becoming a new and significant tourist destination, thanks to the rapid growth of its middle class and enhanced connectivity with Zhuhai/Macau.
"We agree that the Hong Kong-Zhuhai-Macau Bridge, which opened in October 2018, has benefited both Macau and Zhuhai's tourist and retail industries, as evidenced by the increase in Macau visitor arrivals and Zhuhai overnight visitors in 1H19. With more transportation infrastructure, such as the Tuen Mun-Chek Lap Kok Connection, Macau and Zhuhai will have more opportunities in the future "JLL Macau and Zhuhai Managing Director Gregory Ku says.
TODs are being planted in new districts.
Mixed-use projects with office, retail, and apartment components that are closely integrated with intercity and local rail networks are known as transit-oriented developments (TODs). Local governments will likely encourage TOD projects in emerging GBA areas to draw seasoned investors, and it will become a favored mode of entry for international or Hong Kong developers and investors, who have extensive experience and can bring good branding.
GBA policies have aided rapid growth in the TMT and finance sectors in the office industry, resulting in a substantial increase in absorption in both the Guangzhou and Shenzhen Grade A office markets in the last five years. In Guangzhou, absorption is expected to increase by 40 percent or more over the next five years, while in Shenzhen, the rate could increase by as much as 50 percent. Although the unfolding coronavirus situation could put a damper on GBA's office demand in the short term, the medium-to-long-term growth prospects remain positive.