Chinese consortium sees off Hong Kong rivals in ferocious bidding war for prime Shanghai commercial land, ending their stranglehold
- The victory marks a high-profile end to a winning streak for offshore investors, who have repeatedly outbid their mainland rivals in the last year
- Group led by China Resources Land bids US$854 million, or 65,200 yuan per square metre, a new record for Shanghai’s commercial land
A Chinese consortium has outbid Hong Kong developers in a ferocious bidding war for a much coveted plot of commercial land in the heart of Shanghai.
The group led by China Resources Land paid a record-breaking price for the plot after winning a bitterly contested auction that lasted for more than 500 rounds, according to the Shanghai Bureau of Planning and Natural Resources and local media.
The victory marks a high-profile end to a winning streak for offshore investors, who have repeatedly outbid their mainland rivals to claim the lion’s share of commercial deals in China’s top cities over the last year.
The Chinese group saw off the challenge of a powerful Hong Kong consortium comprising Swire Properties, Ping’an Real Estate, and Sun Hung Kai Properties, originally slated as the favourites to come out top in the auction.
The winning bid of 5.8 billion yuan (US$854 million) for the plot in Shanghai’s Jing’an district, almost a quarter higher than the starting bid price, translates to 65,200 yuan per square metre of above-ground gross floor area. That is a new record for Shanghai’s commercial and office land.
It is also the first blockbuster commercial site to go on sale in the core part of Jing’an district in more than five years, according to Savills Shanghai. It is approved for construction of a 180-metre tall office building complemented by an underground retail centre.
The extraordinary auction came at a time when the broader property sector is slowing down. Shanghai’s residential home prices edged up by just 0.4 per cent in 2018, according to a report by Hurun.
Analysts said that is because of the extreme rarity of such sites.
“Developers in China with the financial means are always on the lookout for prime plots in major cities. No matter whether China’s real estate market is in a downturn or not, the value of prime plots in major cities will always be at a premium,” said Shaun Brodie, senior director and head of occupier research, Greater China, at Cushman & Wakefield.
The plot is widely envied for its prime location and easy access to nearby commercial hubs and public transportation. With 89,000 square metres of above-ground space, it overlooks the HKRI Taikoo Hui shopping complex developed by Swire Properties and enjoys access to three metro stations.
China Resources Land is a central government-owned enterprise that notched up 210 billion yuan in contracted sales in 2018. It is also one of China’s largest commercial landlords, with its flagship mall brand Mixc in Shenzhen, Xiamen and Hangzhou.
In the past year overseas investors, including those in Hong Kong, have taken advantage of Chinese investors’ weakness, reeling from a government crackdown on financial risk and debt, to corner a bigger share of the commercial deals in top cities. They took a 61 per cent share of Shanghai’s 105 billion yuan in commercial property deals last year, a huge leap from 24 per cent in 2017, according to Cushman & Wakefield. In Beijing their share surged to 30 per cent from 2.2 per cent a year earlier.
They struck several big-ticket deals in January alone. Singapore’s CapitaLand partnered with US real estate private equity firm AEW to acquire 70 per cent of the Pufa Tower in Shanghai’s Lujiazui financial district from debt-ladden HNA Group for 2.75 billion yuan on January 7. Hong Kong-based Gaw Capital Partners made its second Shanghai office acquisition in 50 days, buying four grade-A office buildings in the Hongqiao area from China Resources Capital Management.