China property

China’s obsession with skyscrapers reaches new heights

PUBLISHED : Tuesday, 14 February, 2017, 4:53pm
UPDATED : Tuesday, 14 February, 2017, 7:57pm

It seems that nothing can curb China’s obsession with skyscrapers.

Fifteen years ago, there were barely any high-rises in China. Now, seven of the 20 tallest buildings in the world are on mainland Chinese soil. With the rapid development of the economy, high-rises have shot up on land once occupied by bungalows and a so-called International Financial Centre or World Trade Centre can be found in every corner of the country.

The construction boom shows no sign of slowing down. Analysts cite two main reasons behind the trend; the acceleration of China’s urbanisation and a desire to improve the national image with modern construction.

For the ninth year running, the world’s second largest economy ranked No 1 in the world for having the largest number of new skyscrapers 200 metres or taller, according to a report by the US-based Council on Tall Buildings and Urban Habitat (CTBUH).

Last year saw 128 such high-rises constructed around the world, with China accounting for 70 per cent of them, or 84 buildings.

“China’s determination to rapidly urbanise virtually commands that tall buildings are part of the equation,” said Daniel Safarik, China director for CTBUH.

From 1990 to 2016, China’s urbanisation ratio grew from 21 to 57 per cent. The State Council has set a target to have 60 per cent of the population living in urban areas by 2020 and wants to help 100 million migrant workers obtain status as urban residents in the same timeframe.

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In order to accommodate the great influx of urban population, China has invested more than 1 trillion yuan annually in redeveloping shantytowns in the cities – and building a landmark tower is unquestionably the best way to showcase the results of urbanisation.

More than 30 Chinese cities had at least one 200-metre or taller building completed last year and more than 200 are in the pipeline for the next few years.

Many people around the world have learned about little-known Chinese cities because of the construction of a major skyscraper, said Safarik, adding that skyscrapers can serve as a symbol of “economic success” for a city.

China’s determination to rapidly urbanise virtually commands that tall buildings are part of the equation
Daniel Safarik, China director for CTBUH

David Ji, the head of research for China at property consultancy Knight Frank, said as more and more Chinese enterprises are going overseas, owning a landmark building is the best way to promote their brand in the international community.

As an example, China’s financial conglomerate Ping An last month completed the 600-metre, 115-storey Ping An International Finance Centre in Shenzhen’s central business district, which surpassed One World Trade Center in New York City to rank as the world’s 4th tallest.

However, as skyscrapers are mostly for office use – not for living – the obvious question is whether China needs so many tall office buildings and whether they are being built in the right places.

Safarik said some skyscrapers in China are commissioned without a strict market-based plan because of the heavy involvement of local government and national state-owned enterprises.

There is a resources mismatch. “We hear of housing shortages in the first-tier cities, we also hear about empty buildings,” he said.

The southern city of Shenzhen, the country’s most expensive housing market, saw eleven 200-metre-plus towers built last year, surpassing the number built in the entire US, despite a serious land shortage for residential housing.

The problem is more serious in less developed cities as high-rises are sprouting up in these mid- and small sized cities.

More than 10 such cities – including Suzhou, Changsha, Wuhan, Nanning and Dalian – will see 300-metre-plus mega towers in the pipeline this year.

In the latest move, Nanjing, a second-tier city near Shanghai, on Tuesday sold a land parcel to state-owned developer China Jinmao Holdings. The government requires the buyer to build a 500-metre-plus office building, which would surpass the 450-metre Zifeng Tower, as the tallest in the city.

Guiyang, the capital city of Guizhou province in southwest China, one of nation’s poorest provinces, will have two 335-metre, 74-storey towers completed in 2017.

“It will be hard for a city like Guiyang to find quality tenants to fill the space,” Knight Frank’s Ji said.

And there is “certainly waste” amid the construction boom because of the disconnect between supply and demand, he added.

If all skyscrapers in the pipeline materialise “it is quite likely we will see an increased number of construction delays, postponements and possibly some structures may be mothballed”, said James Shepherd, DTZ/Cushman & Wakefield’s managing director for Greater China research.

Also, if some of the tall buildings are empty and over time are neglected, they will serve as a symbol of failure rather than success, Safarik said.

Greenland Group’s setback could be a warning. A number of mega towers under development by the state-owned property giant have reportedly stalled without completion, including the 85-storey Dalian Greenland Centre, which was planned to be the tallest building in China’s north east region. Greenland purchased the land in 2010 but hasn’t topped out after seven years.

There are also risks in the ability of management to keep up with the speed of construction. For example, the 632-metre Shanghai Tower, China’s tallest and the world’s second tallest, which was completed in 2015, still has many unoccupied floors due to unsolved technical problems related to fire prevention.

CBRE forecasts the supply of office space in China will peak by the end of 2017. It said the cumulative vacancy area of office space in 17 mainland cities will increase 3.3 percentage points to 23.5 per cent, or 19 million square metres.