WORLD WINNING CITIES | December, 2014
Global Foresight Series 2014
China’s City Winners
Nanjing City Profile
2 China’s City Winners
The Case for Nanjing
No other city in China’s Yangtze River Delta has a claim to history
quite like Nanjing, whose name means ‘Southern Capital’ and which
ruled over both ancient dynasties as well as China’s first modern
republic. The city maintains a prominent role to this day as capital of
Jiangsu Province, one of the richest regions on China’s developed
coast. We see in Nanjing an increasingly dynamic city, the leaders of
which are developing its key strengths while addressing areas that still
need improvement.
China’s City Winners:
Nanjing
Key Features
• Capital of one of China’s most dynamic provinces, and
a key city in the Yangtze River Delta (YRD)
• Colossal educational and research infrastructure, and
a highly educated population
• Large services sector distinguishes it from YRD
manufacturing cities
• Location on Yangtze River and high-speed rail routes
makes it a transport and logistics hub
• E
conomic pull extends beyond Jiangsu Province
and YRD to inland provinces, attracting talent and
shoppers
• One of China’s most significant cities in ancient and
modern history; a budding cultural center and a major
tourist draw
The city’s exceptional university system is by far the most developed
of any city within the Yangtze River Delta (YRD) region. Its cohort of
enrolled higher-education students exceeds even that of Shanghai
in size, and the share of the population with a college degree is
second only to Beijing’s. Nanjing’s government is keen to leverage
its educational resources to greater effect by encouraging more local
graduates to settle in the city, and by creating more opportunities for
talented individuals to turn marketable ideas into private enterprises.
In turn, the strong educational infrastructure supports a robust base
of R&D across a range of industries, and more broadly contributes to
the tertiary sector accounting for a larger share of Nanjing’s economy
and employment than that of any big YRD city save Shanghai. Nanjing
is seeking to expand this share by promoting growth in a variety of
service sectors, notably software and finance. At the same time,
the city has an impressive base of traditional industries, which has
attracted investment from multinationals such as Bosch and BASF.
Planners are expanding beyond a traditional emphasis on steel
and chemicals to prioritize automobiles and electronics, while also
developing more advanced sectors such as biopharmaceuticals and
new energy.
Nanjing City Profile 2014 3
Nanjing is one of the YRD’s most significant transport and logistics
hubs and, sitting on the Yangzte River, is an important inland port. The
city also lies at the crossroads of key lines in China’ s emerging highspeed rail network, including the Beijing-Shanghai route and a recently
operational line connecting Shanghai with inland metropolises such as
Chengdu.
The office market is benefiting as services firms and MNCs account
for a growing share of demand alongside traditional manufacturing
companies. Limited available space in the established downtown area
currently guarantees stable rental growth, while government incentives
are ensuring the take-up of a portion of the large supply being
delivered to the new Hexi CBD.
Lying at the Yangtze River Delta’s north-west corner at the confluence
of many regional highways and conventional rail lines, Nanjing is also
a natural gateway for many of inland China’s residents to reach one of
the coast’s most dynamic regions. The city’s urban area is served by
one of the YRD’s largest and most ambitious subway networks, and
there are plans for suburban rail lines to integrate it with more cities in
the region.
Nanjing’s growing retail market is fuelled not just by local spending
but a huge catchment that attracts people from inland provinces to the
bustling, glitzy malls of Xinjiekou, one of the YRD’s largest and most
important retail concentrations. Developers are also moving to create
new retail clusters in growing markets like Hexi.
Nanjing is sometimes criticised as being old-fashioned and dominated
by the public sector, and lacking the freewheeling entrepreneurial
spirit that has given fellow YRD cities like Suzhou, Hangzhou, Wuxi
and Ningbo an edge in indicators such as GDP, industrial output
and retail sales. We believe that such claims are exaggerated. While
it houses many state-owned champions, Nanjing is also home to
Suning Appliance Co., which a domestic trade group declared to be
China’s largest private company by revenue in 2013. More importantly,
the city’s recent efforts to build on its traditional advantages while
reforming its more conservative culture are showing signs of bearing
fruit – over the past five years Nanjing’s average GDP growth has
been the strongest of any major YRD city.
In terms of the property market, we are optimistic about Nanjing across
most sectors. While like other major Chinese cities Nanjing is building
a number of new urban sub-centres, industrial zones, and business
parks, it has taken a relatively measured approach to the construction
of prime-quality real estate assets, which has helped control the risk
for oversupply in several sectors.
Nanjing’s residential sector has been affected by a recent nationwide
slowdown, but the city’s low current inventories, relatively limited future
pipeline, and rising demand from owner-occupiers should permit prices
to continue to rise at moderate rates.
Nanjing is seeking to leverage its status as a transportation hub to
build capacity as a logistics centre; however, its existing stock of
modern warehouse facilities is still small compared to that of other
YRD cities, and the presence of MNC developers is also relatively
limited. With developers just beginning to expand to promising new
submarkets, the logistics property sector has plenty of potential.
Nanjing’s hotel market faces the greatest immediate risk of oversupply,
as the city’s stock of high-end rooms is set to nearly double over the
next three to five years. Its tourism industry still has room to grow
compared to those of other big YRD draws like Suzhou and Hangzhou,
and the city government hopes that recent international events will
broaden Nanjing’s visitor base beyond the current core of business
travellers.
4 China’s City Winners
Economic Dashboard
Economic Dashboard
Openness
Size
Population (million, 2013)
8.2
Utilised FDI (US$ billion, 2013)
Metropolitan Population (million, 2013)
6.3
Exports (US$ billion, 2013)
GDP (US$ billion, 2013)
132.0
Tertiary GDP (US$ billion, 2013)
71.8
4.0
32.3
Wealth
GDP/Capita (US$, 2013)
16,153
Disposable Income per Capita (US$, 2013)
Growth
Population (% pa, 2000-2013)
2.4
GDP Growth (% pa, 2000–2013, LCU)
17.3
6,573
Education and Labour
Higher Education Institutions (2013)
54
Total Enrolments (2013)
Infrastructure
Airport Passengers Throughput (million, 2013)
Port Cargo Throughput (million tons, 2013)
15.0
202.0
711,600
Unemployment (%, 2013)
2.7
Average Wage Rate* pa (US$, 2012)
9,683
*Average wages of staff and workers in ‘non-private units’ in the Urban Area.
See Definition of Terms
Source: EIU, CEIC, Local Statistics Bureau
Harbin
Changchun
Urumqi
Jilin
Shenyang
Beijing
Tianjin
Hohhot
Taiyuan
Tangshan
Dalian
Yantai
Shijiazhuang
Weifang
Qingdao
Jinan
Lanzhou
Luoyang
Zhengzhou
Chengdu
Wuhan
Chongqing
Changsha
Hangzhou
Wenzhou
Nanchang
Fuzhou
Guiyang
Quanzhou
Kunming
Guangzhou
Nanning
Tier 3 Early Adopter
Wuxi
Nantong
Suzhou
Hefei
Xiangyang
Tier 1 Core
Tier 1.5 Transitional
Tier 2 Growth
Tier 3 Emerging
Changzhou
Xuzhou
Nanjing
Xi’an
Haikou
Dongguan
Xiamen
Shantou
Foshan
Shenzhen
Hong Kong
Macau
Zhuhai
Zhongshan
Taipei
Shanghai
Jiaxing
Ningbo
Shaoxing
Jinhua
Nanjing City Profile 2014 5
Yangtze River Delta (YRD) Cities GDP, 2013
Yangtze River Delta (YRD) Cities GDP Growth, 2008-2013
14%
12%
1,500
Y-o-Y Growth
RMB Billions
2,000
1,000
500
0
10%
8%
6%
4%
2%
Shanghai
Suzhou
Hangzhou
Wuxi
Nanjing
0%
Ningbo
GDP 2013
Source: CEIC, City Statistical Bulletins
38
30
68
21
20
10
0
RMB Trillions
54
40
9
Shanghai
8
Nanjing
1
Hangzhou
16
1
-
Suzhou
Ningbo
12
1
Wuxi
Higher-Education Institutions
“211” Schools
Source: CEIC, Ministry of Education
Note:In the ‘211’ plan, the ‘21’ refers to the twenty-first century, and the final ‘1’
is shorthand for ‘100’ top schools
Nanjing Yangtze River Bridge
2011
2012
Nanjing
Hangzhou
Shanghai
Ningbo
Suzhou
Wuxi
2013
Industrial Output, 2013
68
50
2010
4
16%
3
12%
2
8%
1
4%
0
Shanghai Suzhou
Wuxi
Industrial Output 2013
Source: CEIC, City Statistical Bulletins
Hangzhou Nanjing
5-Year CAGR
Ningbo
0%
5-year CAGR
Number of Schools
60
2009
Source: EIU
Higher Education Institutions, 2013
70
2008
6 China’s City Winners
City Overview
Western Anchor of the Yangtze River Delta
Nanjing sits in the north-west of the Yangtze River Delta (YRD). The
city forms a triangle with Hangzhou and Shanghai that corresponds to
the YRD’s heartland, one of the richest and most developed regions
in China. As the capital of Jiangsu Province, Nanjing stands on the
border between the province’s less developed north and its urbanized,
industrialized south, an area that includes major YRD cities like
Suzhou and Wuxi.
Services-driven Centre and Industrial Suburban Area
The city’s administrative area straddles a bend in the Yangtze River
and covers a total land area of 6,587 sq km, though only a fraction
of it is urbanised. The historic centre of Nanjing is south-east of the
Yangtze River and west of the Purple Mountain, and is still partially
enclosed by Ming Dynasty city walls. Here, former imperial palaces
and presidential compounds share space with the modern city’s
bustling downtown, centred on the Xinjiekou shopping and business
cluster. This historic centre and its immediate surroundings comprise
four services-dominated districts that official records mark as the
‘urban’ city centre. Almost all of Nanjing’s investment-grade offices
and retail are located in this city centre, divided between the traditional
core around Xinjiekou and the master-planned new CBD of Hexi in the
south-west.
The city centre is ringed by a designated ‘suburban’ region.
Despite the suburban label, many of the districts in this area are
developing quickly, thanks to the presence of industrial clusters and
development zones that underpin Nanjing’s secondary sector. The
city’s main manufacturing and logistics parks are concentrated in the
suburban region and, as Nanjing’s urban population grows and the
urbanised area expands, it is also witnessing increased volumes of
residential and commercial development. This includes the areas to
the immediate east and south of the city centre, as well as the area
north of the Yangtze River, which has recently been targeted by
the municipal government for a ‘cross-river development’ strategy.
In a sign of the suburban region’s growing attractiveness, national
Yangtze River Delta
Anhui
Hefei
Jiangsu
Highway
Railway
Nanjing
Wuxi
Wuhu
Suzhou
Shanghai
Hangzhou
Zhejiang
Ningbo
Nanjing City Profile 2014 7
developers like Wanda and China Resources are building or buying
land for mixed-use projects in formerly underdeveloped areas such as
southern Jiangning and northern Pukou.
Nanjing One-hour City Circle
In the far south of Nanjing lie Lishui and Gaochun, two areas that
were formally designated as ‘districts’ in early 2013, but which were
previously considered ‘rural’ counties. They are still lightly developed
and relatively isolated from Nanjing’s main city area.
Trans-Border One-Hour City Circle
Nanjing also anchors a ‘One-Hour City Circle’, a ‘hub and spoke’
model of regional development that envisions a transport infrastructure
linking Nanjing and its seven surrounding cities to form a conveniently
accessible greater urban region. The cities include Zhenjiang,
Yangzhou and Huaian in Jiangsu Province, and Ma’anshan, Wuhu,
Chuzhou, and Xuancheng in Anhui Province – the large presence of
Anhui cities in the mix reflects the weight that Nanjing carries in parts
of Central China. The One-Hour City Circle covers about 63,000 sq
km. Its urban population of 19.8 million is comparable to that of New
York, and its total 2013 GDP of RMB 2.2 trillion (USD 362.6 billion)
ranks between those of San Francisco and Philadelphia.
Huai’an
Jiangsu
Yangzhou
Chuzhou
Zhenjiang
Nanjing
Ma’anshan
Anhui
Shanghai
Wuhu
Xuancheng
Zhejiang
ANHUI
City Center
Liuhe District
ANHUI
Suburban Districts
JIANGSU
Lishui & Gaochun
Nanjing City Center Versus Hinterland, 2012
ANHUI
100%
Pukou District
Qixia District
Gulou
District
Jianye
District
80%
Xuanwu
District
Qinghuai
District
JIANGSU
Yuhuatai
District
Jiangning District
60%
ANHUI
40%
20%
0%
Lishui District
Land Area Residential
Population
GDP
City Centre Districts
Source: Nanjing Statistical Yearbook
Primary
GDP
Secondary
GDP
Suburban Districts
Tertiary
GDP
JIANGSU
Shijiu Lake
Lishui & Gaochun
Gaochun District
ANHUI
Gaocun Lake
8 China’s City Winners
Demographics and Labour Force
Largest YRD Metropolitan Area After Shanghai
Nanjing’s population in 2013 was officially recorded at 8.2 million,
making it more populous than Tier 2 YRD cities like Wuxi and Ningbo,
but smaller than fellow Tier 1.5 cities Hangzhou and Suzhou. Official
statistics can be misleading, however, as they lump city populations
together with towns and villages that fall within their administrative
region. Estimates from the Economist Intelligence Unit (EIU) that focus
on Chinese cities’ contiguous metropolitan area present a truer picture.
Nanjing’s estimated metropolitan population of 6.3 million makes it the
second largest city in the YRD after Shanghai. This is significant from
a real estate perspective because Nanjing’s population of workers and
consumers is concentrated in a relatively large urban centre.
Key Commercial Areas in Nanjing City Center
Yangtze River
Gulou
Xuanwu Lake
Purple Mountain
Xinjiekou
Hexi
Confucius
Temple
Metro Line 1
Metro Line 2
Metro Line 10
Railways
Nanjing City Profile 2014 9
Population, 2013
Between 150,000 and 200,000 new residents have been added to
Nanjing’s metropolitan population over each of the past five years.
These new arrivals include people migrating from inland areas in
search of better opportunities in coastal provinces, as well as students
graduating from Nanjing’s universities who have chosen to remain in
the city.
25
Million People
20
15
10
5
0
Shanghai
Nanjing
Hangzhou
Metropolitan Population
Source: Economist Intelligence Unit (EIU)
Confucius Temple Area
Suzhou
Wuxi
Non-Metro Population
Ningbo
Services-oriented Workforce
About 54.0% of Nanjing’s workforce is employed in the services
sector, compared to 36.8% in the manufacturing sector and 9.2% in
agriculture. The proportion of people in Nanjing’s tertiary sector dwarfs
those of industrial Suzhou and Wuxi, and is even greater than the
share of Nanjing’s fellow provincial capital Hangzhou. In fact, Nanjing’s
labour structure resembles that of Shanghai more than any other city
in the region, though with one key difference: its average wages at
RMB 60,404 a year are almost one-third lower than Shanghai’s RMB
89,601, meaning that Nanjing has one of the most affordable servicesoriented labour forces in the YRD.
10 China’s City Winners
Education and Research
Nanjing University
Educational Attainment, 2013
800
30%
Thousand Students
700
25%
600
20%
500
400
15%
300
10%
200
5%
100
0
Nanjing
Shanghai Hangzhou Suzhou
Ningbo*
Wuxi
Number of Enrolled Students
Share of Population with University Degree
Source: CEIC; Nanjing Population and Family Planning Committee
* No available data for population with degrees from Ningbo
0%
Share of Population with University Degree
One of China’s Leading Educational Centres
In the field of education, Nanjing stands alongside Shanghai in a
league apart from the rest of the Yangtze River Delta. Nanjing is home
to 54 higher education institutions, more than any of its neighbours
and second only to Shanghai’s 67. Even more impressive is Nanjing’s
concentration of schools in the national ‘211’ project, a ranking of
the top 100 schools that China expects to compete globally in the
twenty-first century. Jiangsu’s total of 11 such schools is the highest of
any province in China, and 8 of them are in Nanjing alone. Other Tier
1.5 and Tier 2 YRD cities make do with one or none at all. Nanjing’s
711,600-strong population of enrolled higher-education students in
2013 exceeded Shanghai’s total of 504,800, and, as a proportion
of the city’s total population, was by far the highest in the region.
Nanjing produces over 300,000 graduates per year to supply its
growing service industries. At 26.1%, the share of the population with
a university degree exceeds that of Shanghai and is second only to
Beijing, China’s capital and educational leader.
Nanjing City Profile 2014 11
Nanjing’s educational infrastructure and talented workforce make the
city’s wage differential with Shanghai all the more remarkable. While this
is a boon for companies looking for competitive labour costs, the flip side
is that Nanjing wrestles with a brain drain, as each year many talented
graduates seek higher-paying opportunities in Shanghai and other Tier
1 cities. The Nanjing government is seeking to combat this trend with
a number of new initiatives, including an announcement in early 2014
that the city would unconditionally award local residency (‘hukou’) to all
graduates of local universities, regardless of place of origin.
Research Powerhouse
Nanjing’s prowess in academia goes hand in hand with its leading
position in scientific research and advancement. The city is home
to dozens of innovation parks and incubators, as well as hundreds
of officially recognised research centres and laboratories, many
of them affiliated with key universities and major local enterprises.
Among them are 17 research centres and 25 laboratories that have
received the highest possible national designation; they carry out
research in fields including forestry, pharmaceuticals, pollution control,
telecommunications, palaeontology, flat panel displays, food safety,
and sustainable agriculture. By the end of 2013, Nanjing counted
among its population 82 ‘academicians’ of the Chinese Academies
of Science and Engineering, representing about 90% of all such
scientists in Jiangsu Province. The title of ‘academician’ is among the
highest scientific honours that China bestows, and Nanjing’s large
number guarantees both its cutting-edge status in research as well as
continued access to funds and other resources.
Nanjing has also gained traction in attracting research and
development investments from external firms, many of which
complement existing manufacturing facilities. In the fields of computing
and telecommunications, international corporations such as SAP,
Oracle, IBM and Ericsson have established R&D facilities or innovation
centres in the city, as have domestic companies like Huawei and
ZTE. In addition, Intel has formed a R&D institute in co-operation with
Nanjing’s Southeast University to study cloud computing and mobile
services. In other sectors, Atlas Copco has set up a machinery R&D
centre alongside its industrial and logistics facilities, while Ford has
established a subsidiary to research the manufacture of automobile
components.
12 China’s City Winners
Economic Structure
Strength in Services
Nanjing’s economy stands out among its YRD neighbours for the
large size of its tertiary sector. While Suzhou, Wuxi, Ningbo and
other cities in Shanghai’s industrial backyard tend to be dominated
by manufacturing, Nanjing’s output is more diverse, with services
accounting for 54.4% of the economy in 2013. This may partly be
explained by the city’s status as a provincial capital, which means it
houses a range of provincial government and media institutions; it
is also home to the provincial headquarters of a number of national
financial and telecoms firms. Moreover, the city clearly benefits from
being the main base of electronics retailer Suning, which was China’s
largest private company by revenues in 2012. Broadly speaking,
finance and retail each account for about one-fifth of Nanjing’s services
GDP. The tertiary share of Nanjing’s economy is even greater than
that of fellow capital Hangzhou, due in part to its sizeable higher
education and related research sectors.
Nanjing’s government plans to continue enhancing the role of
services in the city’s economy, targeting a tertiary share of 56% by
2015. Much of this growth is expected to come from the finance and
software sectors. Development of the former will be concentrated in
the emerging Hexi CBD area, which has been planned as a regional
cluster for insurance and finance headquarters, as well as services
outsourcing. Nanjing’s software sector was already China’s third
largest by revenue in 2010, trailing only Beijing and Shenzhen. The
city plans for sales in the sector to quadruple their 2010 totals by 2015,
and has put considerable support into developing and incentivising
investment in eight-plus software parks, the most notable being the
Nanjing Software Valley located in Yuhuatai District.
Economic Structure, 2013
100%
80%
37%
43%
46%
52%
53%
53%
54%
51%
46%
46%
44%
Nanjing
Hangzhou
Wuxi
Suzhou
Ningbo
60%
40%
62%
20%
0%
Shanghai
Tertiary
Secondary
Primary
Source: CEIC, City Statistical Bulletins
Downtown Nanjing
Industrial Structure Shifting Towards Advanced Manufacturing
Nanjing’s secondary sector is dominated by four designated pillar
industries: chemicals, electronics, iron and steel, and automobiles.
In 2012 they accounted for 65.2% of Nanjing’s total industrial output,
up from 63.0% in 2010. Chemicals is by far the largest sector, and
even has a dedicated state-level development zone in the city’s
north. However, growth in industrial output for chemicals and steel
was nearly flat in 2013, which contrasted with higher growth rates for
electronics and especially cars.
Nanjing City Profile 2014 13
Cultivating a Greater Role for Private Firms and Entrepreneurship
Nanjing Pillar Industries, 2013
350
50%
40%
250
200
30%
150
20%
100
10%
50
0
Chemicals
Electronics
2013 Industrial Output
Automotive
Iron and Steel
2010-2013 CAGR
RMB Billions
300
0%
2010-2013 CAGR
Source: Nanjing City Investment Promotion Bureau
The city’s high-level plans show that these trends are expected to
continue. Chemicals’ share of total industrial output is targeted to fall
from 2010 levels of about 30.6% to about 20% by 2015. In line with
national plans to consolidate and redistribute steel-making capacity,
the city government plans for the iron and steel industry’s share of
industrial output to decline from nearly 9% to about 7.5%, with an
emphasis on high-end products for use in cars and ships. Meanwhile,
the roles for electronics and automobiles in the city’s secondary sector
will be boosted.
Municipal planners also have outlined aggressive goals to elevate
Nanjing’s industrial economy into higher-value sectors by increasing
the prominence of eight ‘newly emerging industries’: smart-grid
technology, communications, wind power and photovoltaics, rail
transport, aerospace, new materials, bio-medicine, and energy saving
technology. The city has already scored some notable investments in
these industries. For example, the state-owned aircraft manufacturing
giant AVIC is setting up an engine plant in the Jiangning Development
Zone. The city government has established designated industrial
parks to further the development of these advanced industries,
including an industrial park focused on life-science innovation in
Jiangning District. The city has set a target for the revenues of newly
emerging industries to exceed RMB 700 billion by 2015, compared
with a combined RMB 1.2 trillion expected for existing pillar industries.
Nanjing stands out among YRD cities for the size of its state sector.
The large role of government is most notable in industry, where stateowned enterprises (SOEs) – many of them under central government
control – account for about one-third of output. Nanjing also is a
government town in other aspects: its huge university system is mostly
public, and as one of China’s seven key military regions, Nanjing
is home to a thriving defence industry whose factories, research
institutes, and administrative facilities contribute to the local economy.
Although the strong state presence has guaranteed Nanjing a certain
level of investment and development, so far the city has been less
exposed to the entrepreneurial boom that has driven the success of
other YRD cities like Suzhou, Wuxi and Hangzhou.
City leaders in recent years have begun taking measures to close
the perceived gap in entrepreneurship. They are aware that Nanjing
possesses one of China’s most robust educational and research
infrastructures, a combination which in environments like Boston
and the San Francisco Bay Area has underpinned an efflorescence
of innovation and entrepreneurial vigour. Officials at all levels talk of
incentives for small and medium-size enterprises, incubation facilities,
and of supporting the monetisation of successful innovations. Recent
policies have given researchers at state-owned universities and
laboratories greater freedom to start or participate in businesses based
on their intellectual property.
One of the more comprehensive entrepreneurship-promotion plans is
the ‘Nanjing 321 Plan’, which aims to attract leading scientific talent
from among both mainland and overseas Chinese communities to
launch companies in Nanjing. The plan’s bevy of incentives includes
seed funds, subsidised housing, support from Nanjing’s existing base
of research institutions, and risk compensation. The city is orienting its
existing development zones to meet the needs of technology startups, and is building designated technology clusters and incubators
throughout the city to serve ‘321 Plan’ beneficiaries as well as other
promising young companies.
14 China’s City Winners
Main Development Areas
Decades of population growth and economic development have
caused Nanjing to spread beyond its traditional urban boundaries. The
urban core has been expanding to the east (around Purple Mountain),
south (towards Hexi, the new South Train Station, and beyond), as
well as to the northwest bank of the Yangtze River. The government
also has seeded development in designated locations farther afield.
This section discusses the areas beyond Nanjing’s traditional centre
that JLL considers most important for the city’s ongoing and longterm development, beginning with urban sub-centres in Hexi and
north of the Yangtze, and then introducing the city’s primary industrial
development zones.
Hexi New Town
Hexi New Town spans a 94 sq km area south-west of Nanjing’s
traditional core. Planned and developed since 2002, Hexi has been
conceived to relieve pressure on the traditional core and to become
a comprehensive urban sub-centre. It has benefited from successive
waves of infrastructure development and official support, much of
which is associated with hosting major sporting events such as the
2014 Youth Olympics. Today, Hexi is considered an extension of the
city centre, and is home to the majority of Nanjing’s high-end housing
as well as much of its future office and retail projects.
Hexi New Town’s focal point is the Hexi CBD, whose 2 sq km core
area stands alongside Xinjiekou as one of Nanjing’s main business
districts. An already complete first phase comprises 16 buildings with a
GFA of 2.4 million sqm, and a 5 million sqm second phase is expected
to be completed by the end of 2014. A third phase is being considered.
The CBD has attracted major developers, such as Sun Hung Kai, to
acquire land in the area, and the major local developer and operator
Deji has also been active there. Nanjing’s government intends for the
Hexi CBD to become a centre for finance in Jiangsu Province as well
as nearby areas. Supportive policies have already prompted large
domestic banks, like China Development Bank and China Guangfa
Bank, to purchase entire office buildings within the CBD to serve as
regional headquarters. Other existing office buildings in Hexi have
attracted a range of international firms to set up branches, including
Ernst & Young, Samsung Electronics, Korea’s Hanabank and Taiwan’s
Shin Kong Life Insurance.
Nanjing City Profile 2014 15
Development Zones
Nanjing’s suburban area contains a number of ‘development zones’,
government-designated industrial areas whose infrastructure, policies,
land and other resources are tailored to attract investment from large
domestic and foreign corporations. There are eight provincial-level
zones serving a variety of industries, while there are four zones with
sufficient scale and central government support to have warranted
national-level designation. Details of the four national-level zones
are shown in the table below. The largest (by GDP) and fastestgrowing zones in 2013 were the Nanjing Jiangning Economic and
Technological Development Zone (Jiangning ETDZ) and the Nanjing
Economic and Technological Development Zone (Nanjing ETDZ).
The 2,450 sq km Jiangbei New Area accounts for 40% of Nanjing’s
land area, though its commercial centre is likely to focus on the
riverside Pukou New Town, where prominent national developer China
Resources has already purchased land for a mixed-use complex.
Nanjing State-Level Development Zones GDP, 2013
35%
70
30%
60
RMB Billions
The Jiangbei New Area’s development horizon as a major subcentre for Nanjing remains at least 10-15 years away, with the city’s
immediate focus still fixed on Hexi New Town. Efforts are already
underway to link the Jiangbei New Area effectively with the city core,
however: two metro lines and one tunnel are under construction and
will add to the existing six river-crossings. A total of 21 crossings are
planned by 2030.
80
25%
50
20%
40
15%
30
10%
20
2009-2013 CAGR
Jiangbei New Area
The districts of Pukou and Liuhe sit on the northern bank of the
Yangtze River opposite Nanjing’s urban core, and at present are more
commonly associated with industrial parks and inexpensive housing
than with thriving commercial developments. That looks set to change,
however, as the districts have recently been designated the ‘Jiangbei
New Area’ which is expected to receive the title of ‘National-Level
Development Area’, a status currently held by Shanghai’s Pudong
New Area and a small number of rapidly-developing zones elsewhere
in the country. Such support at both local and national levels will boost
investment in the area and improve Nanjing’s economic links with
other cities to the north of the Yangtze.
5%
10
0
0%
Nanjing
ETDZ
Jiangning
ETDZ
GDP 2013
Chemical
Industrial Park
Technology
Zone
2009-2013 CAGR
Source: Nanjing City Investment Promotion Bureau
Nanjing State-Level Development Zones
Name
Year
Founded
District
Planned Area
(sq km)
Industries of Focus
Nanjing New & High Technology
Industry Development Zone
1991
Pukou
16.5
Software, biological medicine, new energy; Microsoft, Samsung
new materials
Nanjing Economic and Technological
Develoment Zone
1992
Qixia
16.2
Electronics & Information, biological
mediicne, light industrial machinery, new
materials
LG, Sharp, Bosch,
Siemens, A.O. Smith
Jiangning Economic and Technological 1992
Development Zone
Jiangning
38.5
Automobiles, electronics & information,
smart grid, new energy, aviation, software
Ford, Mazda, Siemens,
Motorola, Ericsson,
Hitachi
Nanjing Chemical Industrial Park
Lishui
45
Oil and gas chemical engineering; basic
organic chemicals, life science, energy
conservation, new materials
Sinopec, Petro China,
BASF, BP, DSM,
Celanese, Huntsman
and Ashland
2001
Source: Nanjing Investment Promotion Bureau, Nanjing Investment Environment Report 2011
Notable Investors
16 China’s City Winners
Infrastructure
Highways
As a Yangtze River Delta city, Nanjing is situated among one of
China’s densest networks of national highways and expressways.
Some of the country’s longest and best-known road routes extend
through the city, including the Shanghai-Xinjiang national highway,
the Beijing-Fuzhou national highway and the Shanghai-Chengdu
expressway. A number of expressways also radiate west from Nanjing
across much of Central China, allowing the city to serve as a gateway
to the YRD for much of that region, notably Anhui Province. The city’s
location at the crossroads of regional road networks also positions
it as an overland transport hub and distribution centre for both
manufactured goods and increasing volumes of e-commerce.
Railways
Nanjing occupies a key position in China’s emerging network of
express and high-speed rail lines, whose development over the
past five years has dramatically reduced travel times to some of the
country’s most important cities. Along with Tianjin and Jinan, the city
is a key stop on the Beijing-Shanghai high-speed rail (HSR) line,
meaning that most trains stop there, even those that skip other YRD
stops like Suzhou and Wuxi. At the same time, the express service
from Nanjing has been extended west to Hefei and Wuhan, and
express trains to Chengdu began running in mid-2014. Shorter, more
direct lines are also reducing travel times to cities in eastern China;
a line to Hangzhou was completed in July 2013, and one to Anhui’s
industrial hubs of Wuhu and Anqing is scheduled to open in mid-2015.
While some of Nanjing’s HSR traffic passes through the old Nanjing
Railway Station in the city’s north, the majority of fast trains stop at
Nanjing South Railway Station. One of China’s largest high-speed rail
stations in terms of floor area, the South Railway Station was built in
tandem with the high-speed network and opened in 2010.
Express and High-Speed Rail (HSR) Network, 2014
Harbin
Changchun
Shenyang
Beijing
Taiyuan
Xi’an
Chengdu
Chongqing
Under Construction
(Major Routes)
Wuhan
Nanjing
Shanghai
Hangzhou
Hefei
Changsha
Nanchang
Fuzhou
Direct Service from Nanjing
Other High-Speed Lines
Qingdao
Zhengzhou
Lanzhou
Dalian
Tianjin
Jinan
Shijiazhuang
Kunming
Nanning
Guangzhou
Shenzhen/
Hong Kong
Nanjing City Profile 2014 17
Express and High-Speed Rail (HSR) Links
From
Nanjing
To:
Distance
(km)
Journey
Journey Time:
Time: Fast Regular Train
Train (hours)
(hours)
Date
Completed
(est.)
Shanghai
301
1.25
4+
July 2010
Hangzhou
249
1.5
6+
July 2013
Beijing
1,017
3.75
11+
Dec 2009
Wuhan
517
3.5
7+
April 2009
1,731
15
30+
July 2014
Chengdu
Nanjing is also a major freight hub, with traffic by rail of 17.0 million
tons in 2013, fivefold the relevant figure for Hangzhou and more than
double that of Shanghai.
Metro and Regional Rail Network
With its first line opening in 2005, Nanjing was among the earliest
Tier 1.5 cities in China to enter the ‘subway age’. Passengers made
roughly 400 million metro journeys in 2012, placing Nanjing alongside
Chonqqing as the most heavily used system outside of the four Tier
1 cities. The subway supports the growth of the city’s modern service
sector by facilitating labour movements from suburban areas to the
central business districts.
The city’s current network consists of five lines and is 180 km long,
making it the longest subway network of any YRD city outside of
Shanghai. Three lines were completed shortly before the city played
host to the Youth Olympics in mid-2014, including one traditional
metro line serving the city centre and two designated surburban
lines that extend to outer districts such as Liuhe and Pukou in the
north and the border of Lishui in the south. Four more lines are under
construction and expected to reach completion by 2017. Some of the
suburban lines are planned to be extended beyond Nanjing’s borders
as part of an emerging regional rail system that will be integrated with
the metro network.
Looking further ahead, the metro network will expand to include 17
regular metro lines and six suburban lines by 2030. City planners
have a stated goal of building a dense network such that most of the
traditional core population will live within 600m of a station.
River Port
Freight throughput at Nanjing’s port rose 5.2% in 2013 to reach 202.0
million tons, while container traffic reached 2.7 million TEUs, up
16.1%. Freight related to foreign trade accounted for about a tenth of
the total (22.0 million tons), but is growing fast, up 26.5% y-o-y.
Nanjing’s most important port facility is Longtan Harbour, located on
the southern bank of the Yangtze River to the north-west of the city’s
downtown. There are also five other ‘functional zones’ along the city’s
extensive riverbank in which the government is investing in improved
port infrastructure. The port areas are administered by the Nanjing
Port Group. The Group positions Nanjing’s port as a “multi-functional
river-seaport” that can serve requirements for transhipment, transfers
between waterborne and overland transport, cargo distribution, and
international trade. An ongoing project to dredge the Yangtze River is
expected to make Nanjing’s port accessible to ships of up to 80,000
deadweight tons (DWT), which will expand the range of vessels able
to dock at the city and reinforce its status as one of China’s key river
transport hubs.
18 China’s City Winners
Airport
Lukou International Airport bills itself as one of the busiest passenger
and freight airports in East China, though these claims should not
obscure the fact that convenient access to Shanghai and its two
airports means that, compared to more inland centres like Wuhan and
Chengdu, Nanjing has relatively limited potential as a regional air hub.
Even so, the airport is becoming increasingly busy, handling over
130,000 flights in 2013. Since 2009, passenger throughput has risen
at about 8.5% a year to a 2013 level of 15.0 million. Meanwhile, freight
traffic has grown by about 6.3% annually over the same period to
reach 255,800 tons in 2013. Rising traffic levels have encouraged the
airport to embark on an expansion plan that includes a 3.6 km second
runway as well as a large second terminal building. The expansion
went into operation in July 2014. The expanded airport is expected
to satisfy projected 2020 traffic of 30 million annual passengers and
800,000 tons of freight.
The city government has also been investing heavily in boosting
accessibility between the airport and downtown, about 36 km to the
north-west. The airport expressway was widened to 12 lanes in 2012,
and a recently completed metro line extends from the airport to the
city’s South Railway Station.
Map of Existing and Planned Metro Network
iver
R
gtze
Yan
Purple Mountain
Yan
g
tze
Riv
er
Xinjiekou
Hexi
Existing
Under
Construction
Planned
(tentative)
Nanjing City Profile 2014 19
Lifestyle
A True Centre of History and Culture
It is a cliché that every city in China declares itself a ‘famous historical
and cultural city,’ but few have as much right to the claim as Nanjing.
As a former seat of power of six dynasties and the capital of China’s
first modern republic, Nanjing has an air of imperial regality that
is unique among the Yangtze River Delta’s more freewheeling
commercial and cultural centres. Each year droves of tourists visit the
city’s eastern Purple Mountain, whose slopes hold the tombs of the
ancient Hongwu Emperor and modern founding father Sun Yat-sen.
The city’s legacy permeates day-to-day life as well; for example
in the largely-intact Ming-era city walls through which commuters
pass daily, and the Republican-era street grid infused with some of
China’s earliest modern urban planning. Locals’ pride in their heritage
manifests itself in the recent trend of restaurants that serve haute
cuisine from the city’s days as the Republican capital.
Nanjing enjoys, along with Hangzhou, a reputation as one of the
YRD’s more relaxing corners - prosperous and dynamic but removed
from the hectic bustle of Shanghai and its satellites. Locals and
newcomers alike find the city more suitable for ‘living’ than Shanghai,
thanks to its lower cost of living, good educational infrastructure,
View from Xuanwu Lake
and pleasant dwelling environment. The latter point is evidenced in
touches such as streets shaded by rows of trees, among them historic
plane trees that residents fought to protect amidst the city’s subway
construction boom.
The New York Times has praised Nanjing for its “youthful exuberance.”
It is a city supported by a large student population which, in turn,
sustains a rising bar and music industry. At the same time, a growing
group of independent artists – including several Nanjing natives that
have returned home from careers abroad and in Beijing and Shanghai
- shows works in local restaurants, cafés and galleries. At grander
levels, the local government and private investors are promoting big
projects to put Nanjing on the global art and architecture map. Along
with the city’s historical assets, this push has given Nanjing one of the
most robust collections of museums and cultural institutions of any
Tier 1.5 city in China. The most notable recent addition is the Sifang
Art Museum, a privately-funded 20,000 sqm exhibition space in the
city’s forested periphery that was designed by New York architect
Steven Holl, and which displays the work of a range of international
contemporary artists.
20 China’s City Winners
Major Local Enterprises
Suning Appliance Corporation
Nanjing Iron & Steel Group
Established in 1990, Suning has grown to become one of China’s largest
enterprises; its network of 1,600 appliance stores spread over nearly 300
cities has made it a household name across the country. The firm employs
180,000 staff in China, and in recent years has been one of the few
traditional retailers to build a significant e-commerce presence. Listed on the
Shenzhen Stock Exchange in 2004, Suning earned sales revenues of RMB
232.7 billion in 2012, and in 2013 the All China Federation of Industry and
Commerce (ACFIC) declared it China’s largest private company by revenue.
Nanjing Iron & Steel Group was founded in 1958 and was the first iron and
steel enterprise in Jiangsu Province. The group’s primary steel-making
subsidiary (Nanjing Iron & Steel Co.) produced 7.2 million tonnes of steel
and generated revenues of RMB 32 billion in 2012. Listed on the Shanghai
Stock Exchange in 2000, the group owns over 10 other subsidiaries
involved in mining, real estate, logistics and hospitality, among other fields.
Yurun Group
In 2013, Yurun Group ranked 8th on ACFIC’s list of China’s largest private
firms. Founded in1993, the conglomerate has its roots in food processing
and is currently China’s largest meat processor. Over the past two decades,
Yurun has expanded to include over 300 subsidiary companies in industries
such as finance, real estate, construction, logistics, retail and hospitality.
In total the group employs over 130,000 people and in 2012 generated
revenues of RMB 106.1 billion.
Sanpower Group
Sanpower Group is a large private firm whose enterprises cover five main
industries: retail and trading, investment, media, IT services, and real estate.
Its most iconic properties are the three large department stores owned
by its subsidiary Nanjing Xinjiekou Department Store Co. in downtown
Nanjing. Sanpower earned revenues of RMB 56 billion in 2012 and the
group currently employs over 60,000 people worldwide. The firm made
international headlines in 2014 when it purchased UK department store
chain House of Fraser.
Nanjing City Profile 2014 21
Golden Eagle Group
Jinling Petrochemichal (SOE)
Golden Eagle Group’s retail division is one of Nanjing’s most recognisable
department store chains. Since its flagship Golden Eagle store opened in
the Xinjiekou retail cluster, the company has established 26 self-owned
stores in 15 cities around the country, with a total GFA of over 1 million
sqm. While many stores are in cities around Nanjing, the firm has a large
presence in the western provinces of Yunnan and Shaanxi as well. In
addition to retail, Golden Eagle Group is also active in the residential and
hotel property sectors. Golden Eagle’s retail division earned revenues of
RMB 16.8 billion in 2013.
Jinling Petrochemical is a local subsidiary of China’s state-owned oil titan,
Sinopec. Located in Qixia district in north-east Nanjing, the company’s key
activities include oil refining as well as the production and sale of various
petrochemical products; it is the largest production base for detergent raw
materials in China. In 2013 the company processed 17 million tons of crude
oil, and its total revenue exceeded RMB 10 billion.
22 China’s City Winners
Major Foreign Investments
Bosch
Kimberly-Clark
In 2013, global automotive technology and services supplier Bosch invested
RMB 1.1 billion (US$171 million) in Nanjing for the construction of a
production hub and R&D base for its Asia Pacific automotive aftermarket
division. Located in the Nanjing Economic and Technological Development
Zone, the new plant is expected to employ 3,500 people by 2015 and have
a production capacity of 125 million spark plugs, 80 million brake pads and
25,000 units of diagnostic equipment.
In 2013, Kimberly-Clark completed an international-grade diaper products
manufacturing plant in Nanjing that included affiliated product development,
research and logistics facilities. Designed to serve China’s growing diaper
market, the plant was built at a cost of US$100 million. It will utilise a
fully-automated production line and other advanced techniques to boost
efficiency and reduce costs and delivery times in serving the East China
region.
Yangzi Pec–BASF
Sun Well Solar
Yangzi Pec–BASF is a joint venture between Sinopec and BASF. Set up in
2000, total investment reached US$4.6 billion by 2012. A polymer plant with
annual output of 60,000 tons is scheduled to go into operation in 2014. It is
the largest Sino-German petrochemical joint venture in China.
Renewable energy equipment-maker Sun Well Solar is one of Taiwan’s
key manufacturers of silicon thin-film modules. In 2010 the firm started
construction on Nanjing’s first thin-film solar-cell production base. Sun Well
Solar is investing US$600 million in the project, which is expected to reach
full capacity of 300 mW by 2015.
Schaeffler
In 2013, Schaeffler, a worldwide leading manufacturer of precision bearings,
invested €200 million (US$260 million) to build its largest China plant in
Nanjing. Located in Jiangning High-tech Industrial Park, the factory will
produce precision bearings for automobiles, wind power and other industrial
equipment. The facility’s annual output value is expected to reach RMB 8-12
billion.
Nanjing City Profile 2014 23
Real Estate Overview
Real Estate Dashboard, 3Q 2014
Market Size
Occupiers
Office Stock Grade A (sqm)
Retail Stock (sqm)
640,300
1,455,100
Number of International-Brand Hotels, 4-Star and Above
17
Retail
Office Vacancy Grade A (%)
Prime Retail Space Under Construction (sqm)
477,600
22.0%
533,000
Prime Retail Vacancy (%)
5.7%
Service Firms
PwC, Deloitte, KPMG, JLL, DTZ
Financial
Institutions
Citibank, HSBC, Standard Chartered Bank, The
Bank of East Asia, Bank of Nanjing, Liberty Mutual
Insurance, Allianz, Pacific-Aetna Life Insurance, CITIC
Prudential, MetLife, Aviva-COFCO Life Insurance, Sun
Life Everbright Life Insurance, AIA
Business Parks/
Industrial
SH Volks Wagen, Changan-Ford-Mazda, SAC&ABB,
Brembo, Siemens, Ericsson Panda Communication,
Bao Steel, BOSCH, Kimberly-Clark, Philips, Honeywell,
Hitachi, Du Pont, Valeo, Faurecia, TATA, Caterpillar,
Continental
Benchmark Values
Offices Grade A – Rents (RMB per sqm pa)
Prime Retail – Rents (RMB per sqm pa)
1,485
10,678
Logistics – Rents (RMB per sqm pa)
294
Manufacturing – Rents
275
High-end Residential CVs (RMB per sqm)
22,354
Offices Grade A – Indicative Yields (%)
4.7%
Source: JLL Research
Key Players
Key Transactions
Investors
Acquired Nanjing IFC, a landmark project (72,700 sqm
Sanpower Group office and 27,500 sqm retail) in Xinjiekou from ARA for
RMB 2.5 billion (US$406 million), in Q1 2014
Investors/Developers/Operators
Residential
Poly, China Overseas Land & Investment (COLI),
China Resources Land, Vanke, Forte, Evergrande,
China Merchants, Hutchison Whampoa, Landsea,
Suning Group, Yanlord Land Group, Agile Property
Office
Greenland Group, Golden Eagle, Deji Group, Suning
Group, Siya Group, China Merchants Property
Development
Industrial/
Logistics
PGL, Global Logistic Properties, Longtan Development,
Goodman, Vailog, Shunyuan Logistics, Vantage
Logistics
Wanda Group, Greenland Group, Deji Group, Golden
Retail (Shopping
Eagle, China Overseas Land & Investment, Suning
Malls)
Group, Da Fa Land, Nanjing International Group
Retail
(Department
Stores)
New World Department Store, Golden Eagle, Grand
Ocean, Suning Group, Nanjing Central DS Group,
Spring Land, Yu Run Group
Hotels
InterContinental, Sheraton, Hilton, Sofitel, Westin,
Crowne Plaza
Hypermarkets: Walmart, Metro, Carrefour, Jin Run Fa
Food and Beverage: Starbucks, Costa, KFC,
McDonald’s, Pizza Hut, Element Fresh
Market Activity
Office Space Under Construction Grade A (sqm)
Apparel: Prada, Louis Vuitton, Gucci, Ermenegildo
Zegna, Giorgio Armani, Burberry, ZARA, H&M, MUJI,
Uniqlo, IT, GAP
Franshion
China
Development
Bank/China
Guangfa Bank
Acquired a 51% stake in the Nanjing International
Center (NIC) project from Nanjing International Group
in 2013. The transaction value was RMB 1.1 billion and
the project consists of office, retail, hotel and residential
section, with a GFA of over 400,000 sqm (including
future phases).
These two banks each acquired office towers in Walsin
Centro Phase 1 (located in Hexi) from the Walsin
Group, for self-use.
•In 2010, China Development Bank bought one 30,000
sqm building for RMB 675 million.
•In 2011, China Guangfa Bank purchased another
building (27,000 sqm) in the project for RMB 661
million.
24 China’s City Winners
JLL’s View
Industrial & Logistics
Residential
Nanjing’s traditional industries - like chemicals, automobiles and
electronics - will increasingly share the limelight with higher valueadd sectors such as aerospace and biopharmaceuticals, and an
improving business environment for these industries is expected
to attract related firms to establish or expand capacity in the city.
In terms of logistics property, the city has major ambitions as a
logistics, transport and distribution hub for both manufactured
products and consumer goods, but the current stock of modern
warehouses is small compared to other YRD cities. GLP was once
the only major international developer in the market, but it has been
joined in 2014 by others like Goodman and Vailog, and interest in
the city continues to grow. Lishui District, in the city’s south, has
considerable potential as a new logistics submarket, and has been
attracting increasing attention from developers.
Despite a recent nationwide residential market slowdown, the
outlook for Nanjing’s high-end residential sector remains positive
thanks to a combination of relatively limited supply pipeline, low
inventories and rising demand from owner-occupiers (a buyer
segment the government is keen to support). Housing prices are
highest in the traditional downtown, while the overwhelming majority
of existing and future supply is concentrated in Hexi New Town.
An expanding transportation infrastructure (notably the subway
network) will allow other submarkets to develop in the future.
Offices
Absorption in Nanjing’s office market has traditionally been driven
by domestic firms in core industries such as chemicals and
automobiles. However, in recent years office demand has evolved
in line with the city’s changing economic structure, with tertiary
industries accounting for a greater share. Rising demand from these
sectors will ensure moderate rental growth in the overall market for
the foreseeable future, with the strongest performance being in the
supply-constrained Xinjiekou submarket. At the same time, high
volumes of supply will lead rents to increase at a slower pace in the
new Hexi CBD, though government support for companies locating
in this area will prevent vacancy from reaching critical levels.
Retail
Though Nanjing’s locals are not as famously free-spending as
those in some YRD cities, the city’s retail market continues to grow
rapidly, thanks in part to a large catchment that extends deep into
neighbouring provinces. The city’s retail landscape has a high
degree of concentration around the traditional downtown Xinjiekou
submarket, which is home to Nanjing’s main luxury mall. In recent
years, however, developers have started to expand into other areas
– notably Hexi – and have also begun experimenting with suburbanfriendly formats such as outlet malls.
Hotels
The number of star-rated hotels in Nanjing totalled 107 in 2013,
and JLL currently tracks 17 international-branded hotels rated four
stars and above. The hotels market is supported by the city’s large
number of business travellers, though many of them work in budgetconscious traditional industries that effectively limit achievable
room rates. Hotel operators are hopeful that upcoming international
sporting events, as well as a renewed government push to boost
local tourism, will help attract a larger and more diverse customer
base in time to absorb a projected 90% increase in high-end stock
over the next few years.
Nanjing City Profile 2014 25
Office Market
Increasingly diverse tenant base drives demand
The Nanjing office market has grown quickly over the past 3-4 years,
though at 643,000 sq m its Grade A stock in 3Q14 was still slightly
less than Hangzhou’s and well below that of Suzhou. Historically,
modern office demand has been driven by manufacturing industries,
including automotive, electronics and chemicals manufacturing. In
recent years, demand increasingly has been supported by a mix of
traditional industries such as pharmaceuticals along with an increasing
share of tertiary industries, including financial services (e.g. banks and
insurance) as well as professional services and real estate. Currently,
domestic companies occupy about three-quarters of Grade A space in
the city. While MNC demand in Nanjing is relatively strong compared
to other Tier 2 markets, domestic demand has been the primary driver
of the market over the past two years. In addition, most of Nanjing’s
Grade B office space is occupied by local companies.
Xinjiekou is the most popular office submarket and Nanjing’s traditional
business district, containing clusters of MNC offices as well as the
highest density of financial services companies. The area is located
around one of the intersections of the city’s two existing metro lines
and is also known for its high-end retail market. Xinjiekou’s Grade A
office stock accounted for 47% of the city’s 3Q14 total. The second
mature submarket is Gulou which is located to the north of Xinjiekou
bordering Xuanwu Lake to the east, and close to the Jiangsu
Provincial Government and a high concentration of educational
institutions. As of Q3 2014, the Grade A office vacancy rate was
approximately 10.7% in Xinjiekou and 17.9% in Gulou. The Xinjiekou
submarket enjoys a rental premium over Nanjing’s other submarkets
due to its more mature business environment and superior retail
amenities.
Core Grade A Office Stock Comparison, Nanjing Submarkets
Core Grade A Office Stock Comparison, YRD Cities
60%
6
50%
40%
4
30%
3
20%
2
1
10%
0
0%
Shanghai Hangzhou Suzhou
Nanjing
Ningbo
Wuxi
3Q2014 Stock
2016 Forecast
3Q2014 Vacancy
2016 Vacancy Forecast
Source: JLL Real Estate Intelligence Service (REIS)
400
Vacancy Rate
Millions sqm
5
500
Thousands sqm
7
300
200
100
0
Xinjiekou
3Q2014 Stock
Gulou
Hexi
2016 Forecast
Source: JLL Real Estate Intelligence Service (REIS)
Others
26 China’s City Winners
The most significant new office submarket in Nanjing is Hexi, a
government-supported ‘New CBD’ built close to the Yangtze River,
several kilometres to the south-west of the traditional downtown. The
area has developed quickly with the government’s backing, expanding
since 2006 to contain approximately 32% of the city’s Grade A market
and 35% of its Grade B market. Looking ahead, we expect large
supply to keep Hexi’s vacancy elevated, but preferential policies for
Hexi and subsidies for companies moving are stimulating its rapid
development as an office location, helping keep vacancy below critical
levels. Owner-occupiers take up a high percentage of the office stock
in Hexi, with state-owned firms and large banks commonly developing
or purchasing office buildings for their own use.
Core Grade A Office Rent Comparison, YRD Cities, 3Q 2014
10
RMB per sqm per day
8
6
4
2
0
Shanghai Hangzhou
Nanjing
Suzhou
Ningbo
Wuxi
Source: JLL Real Estate Intelligence Service (REIS)
Looking forward, the Grade A office market is expected to see
moderate rental growth of approximately 2-6% per annum, driven by
steady upgrade demand from local financial and professional services
firms, and gradual expansion demand from MNCs to support their
growing businesses in the region. The traditional CBD (and Xinjiekou
in particular) has limited long-term supply and is likely to propel the
majority of this growth. Hexi, on the other hand, with a large pipeline of
future projects, will have high vacancy levels for the foreseeable future,
and is forecast to become a tenant-favourable market.
Downtown Xinjiekou, Facing Gulou
Nanjing City Profile 2014 27
Retail Market
Strong retail position in the YRD region
Nanjing’s retail market includes about 1.5 million sq m of organised
retail space, of which shopping centres constitute 1 million sqm and
freestanding department stores the remainder. Xinjiekou is the core
retail submarket and the focal point of the city, where the intersection
of multiple metro lines brings in thousands of customers per day.
Xinjiekou also attracts visitors from surrounding cities and towns such
as Zhenjiang, Yangzhou, and Huai’an. Xinjiekou is home to Deji Plaza,
the city’s sole luxury shopping mall, which was built in two phases for
a total of 150,000 sqm. The nearby Golden Eagle Department Store is
the city’s top-selling department store. Secondary submarkets include
Gulou and Zhujiang Road to the north, Confucius Temple to the south,
and Hexi to the west.
Prime Retail Stock Comparison, YRD Cities
14
16%
12
14%
12%
10%
8
8%
6
6%
4
4%
2
0
2%
Shanghai Suzhou Hangzhou Ningbo
Nanjing
Wuxi
3Q2014 Stock
2016 Forecast
3Q2014 Vacancy
2016 Vacancy Forecast
Source: JLL Real Estate Intelligence Service (REIS)
0%
Vacancy
Millions sqm
10
28 China’s City Winners
Prime Retail Rent Comparison, YRD Cities, 3Q 2014
Over the past five years, the retail market has grown rapidly, with total
retail sales doubling from RMB 165.2 billion in 2008 to RMB 350.4
billion in 2013. Compared to other Yangtze River Delta cities, Nanjing’s
total retail sales are about even with Suzhou and Hangzhou, and its
60
RMB per sqm per day
50
market has grown at a five-year compound annual growth rate (CAGR)
of 16.2%. This rapid uplift in retail sales is in line with the steady rise
in disposable income per capita, which reached RMB 39,881 in 2013
for a five-year CAGR of 12.3%, the highest rate of any major YRD city.
While Nanjing is not noted for its spending power relative to cities like
Wuxi and Hangzhou, it remains a large and important market.
40
30
20
10
0
Shanghai
Nanjing
Hangzhou
Wuxi
Ningbo
Source: JLL Real Estate Intelligence Service (REIS)
Suzhou
Nanjing City Profile 2014 29
New districts and retail formats further strengthen the local
retail market
Thus far, no submarkets have been able to compete directly with
Xinjiekou’s dominance of the city’s retail market. However, this is set
to change. Hexi is undergoing steady development and will eventually
become a major retail destination. The area has already grown from
having no organised retail in 2008 to over 340,000 sq m of space by
3Q14, in the process becoming the city’s second largest submarket
in floor area terms. Major developers with upcoming projects in Hexi
include Sun Hung Kai Properties, Deji and Golden Eagle. Many of
these projects are located around the Yuantong Subway station, at
the intersection of two existing subway lines. Additional modern retail
properties are appearing in still farther afield locations, including
Wonder City in Yuhuatai and a number of projects have been built in
Jiangning, most notably Jiangning Wanda Plaza.
Prime Retail Stock Comparison, Nanjing Submarkets
700
Thousands sqm
600
500
400
300
200
100
0
Xinjiekou
3Q2014 Stock
Hexi
Others
Gulou
Confucius
Temple
2016 Forecast
Source: JLL Real Estate Intelligence Service (REIS)
Although traditional shopping malls and department stores have
dominated the retail market to date, outlet malls are a growing
presence. Developers are planning for catchment radii that capture
the whole city plus neighbouring cities, especially those in North
Jiangsu and East Anhui. A leading example is Nanjing Bailian Outlets
in Tangshan New City, which will have a total GFA of 140,000 sq m
and is expected to repeat the operator’s success in Qingpu, Shanghai.
This and two other under-construction outlet properties will include
luxury brands and are scheduled to open by end-2015. These malls
will further strengthen Nanjing’s role as one of the major retail cities in
the YRD region.
30 China’s City Winners
Residential Market
Low inventories and stable demand give reason for optimism
Nanjing’s high-end housing market has, in recent years, followed a
policy-driven trajectory similar to many other large cities. After the
disruptions from the financial crisis inspired the government to loosen
credit conditions, both the high-end and mass markets staged a rapid
recovery. As speculative demand from investors threatened to price
ordinary homebuyers out of the city’s housing market, however, a fresh
round of tightening policies were introduced in late 2010 which caused
high-end sales to fall and led developers to cut prices in 2011. Sales
and prices rose over late 2012 and 2013 as the government fine-tuned
policies to support the aspirations of first-time homebuyers.
High-end Residential Stock Comparison, YRD Cities
90,000
120
80,000
70,000
60,000
80
50,000
60
40,000
40
30,000
20,000
20
0
10,000
Wuxi
Hangzhou Nanjing Shanghai Ningbo
3Q2014 Stock
2016 Forecast
3Q2014 Capital Value
Source: JLL Real Estate Intelligence Service (REIS)
Suzhou
0
RMB/sqm
Number of Units ’000
100
The high-end housing market is supported by the provincial capital’s
large population of professionals, civil servants, as well as employees
in state-owned enterprises and top-performing private firms. Nanjing
is also a magnet for wealthy homebuyers from nearby inland cities
seeking a foothold in the YRD.
The city contains five major high-end submarkets. Nanjing’s first
high-end projects were built in response to the development of Hexi
New Town, which has since established itself as the city’s largest
and most active submarket. At RMB 22,900 per sq m, Hexi’s average
high-end prices are second only to the downtown Chengzhong
submarket’s RMB 28,400 per sq m. Despite Chengzhong’s good
location and convenient transportation, future high-end supply there
is limited due to a lack of land. Since Metro Line 1 went into operation
in 2006, high-end residential developments have quickly expanded
from the downtown and Hexi to areas like Chengdong (in the east)
and Chengnan (in the south). Elsewhere, Chengbei (in the north) is a
mature residential area in which urban redevelopment is just beginning
to spur high-end development – prices there were low in late-2014, but
potential is high, with many new projects scheduled to launch in the
coming years.
Nanjing City Profile 2014 31
60
30,000
50
25,000
40
20,000
30
15,000
20
10,000
10
5,000
0
Hexi
Chengnan Chengzhong Chengbei Chengdong
3Q2014 Stock
2016 Forecast
Source: JLL Real Estate Intelligence Service (REIS)
RMB/sqm
Number of Units ’000
High-end Residential Stock Comparison, Nanjing Submarkets
0
3Q2014 Average Price
As of October 2014, high-end sales in Nanjing and other YRD cities
were slowing, and softer market conditions had prompted local
governments to lift the Housing Purchase Restrictions (HPRs). Despite
the slowdown, we remain optimistic about Nanjing’s residential market.
Future demand is expected to be strong: alongside traditional drivers,
graduates of the city’s top-tier universities who are moving into local
high-paying industries provide a steady stream of the government’s
favoured market of first-time homebuyers. In addition, both Nanjing’s
current inventories and future high-end supply are limited compared
to other major YRD cities, indicating that price growth should remain
positive even if sales are impacted by this year’s slowdown.
32 China’s City Winners
Industrial and Logistics
A maturing logistics hub
Located at the centre of Nanjing Metropolitan Area and along a major
bend in the Yangtze River, Nanjing is a major logistics hub serving
cities in north Jiangsu and east Anhui. There are three primary
logistics submarkets in Nanjing: Longtan Logistics Park (near the river
port), Airport Logistics Park (in the Jiangning Development Zone) and
Chemical Industry Park. In combination these submarkets currently
provide over 500,000 sq m of high-quality warehouse space, with
demand mostly coming from manufacturers and the petrochemical
sector, as well as from rapidly growing e-commerce business.
Millions sqm
4
20%
3
15%
2
10%
1
5%
0%
Nanjing
Ningbo
3Q2014 Stock
2016 Forecast
3Q2014 Vacancy
2016 Vacancy Forecast
Source: JLL Real Estate Intelligence Service (REIS)
1.2
1.0
0.8
0.6
0.4
Shanghai
Suzhou
Ningbo
Nanjing
Source: JLL Real Estate Intelligence Service (REIS)
Vacancy
25%
Suzhou
1.4
0.0
5
Shanghai
Prime Warehouse Rent Comparison, YRD Cities, 2Q2014
0.2
Non-bonded Warehouse Stock Comparison, YRD Cities
0
However, despite its huge growth potential, Nanjing’s high-quality
logistics market remains small compared to YRD peers like Suzhou.
The major constraint is the city’s relative lack of qualified logistics
facilities, a result of restrictions on land for logistics use. As in other
major Chinese cities, logistics land in Nanjing is not as favoured by
local governments as land for manufacturing or commercial use, which
generate more tax and create more jobs. Much of Nanjing’s logistics
property stock consists of manufacturing-refurbished warehouses,
whose physical conditions and safety levels usually do not meet the
requirements of 3PLs and their end-users. Until recently GLP was the
only major international developer in the market, but it has been joined
in 2014 by others like Goodman and Vailog, and interest in the city
continues to grow.
RMB per sqm per day
Climbing the manufacturing value chain
Nanjing’s manufacturing sector traditionally has been oriented around
the pillar industries of chemicals, electronics, steel, and automobiles,
which the government supports with key development zones and
related infrastructure and incentives, and which have received
investments from a range of MNCs. The city is now placing greater
priority on more advanced industries including biopharmaceuticals,
aerospace, and smart grid technology. Nanjing’s industrial zones
compete for investment with YRD industrial titans like Suzhou and
Wuxi. The provincial capital’s advantages include a location and
transport infrastructure favourable for inland regional distribution, as
well as a skilled workforce that is attractive to firms seeking to pair
manufacturing plants with R&D facilities.
Nanjing’s vacancy rate rose from single digits to 16.5% in 3Q14 as
new supply reached the market, but inquiry levels continue to indicate
healthy demand. Both international and major local developers
now are looking to buy land parcels, with several focusing on Lishui
District, far to the south of Nanjing’s city centre where land is easier to
acqure. Over the next two years, nearly 300,000 sq m of high-quality
warehouses are projected to be finished, with much of the new supply
in Lishui. Despite the risk of oversupply, Lishui is very likely to become
another major logistic submarket in addition to the existing three,
covering distribution needs for Nanjing and the southern part of Anhui
Province.
Nanjing City Profile 2014 33
Hotels
High-end stock set for rapid increase
Data from the Nanjing Tourism Committee indicate that as of year-end
2013, the city had 107 star-rated hotels. The high-end hotel market
(including both international and domestic properties) contained
18 five-star hotels and 23 four-star ones. Nanjing’s high-end hotels
are concentrated in the Gulou area (which enjoys views of Xuanwu
Lake), Xinjiekou and Hexi New Town. As of the end of 2013, the
five-star hotel market had an average occupancy of 66.4% and an
average daily rate (ADR) of about RMB 627, while four-star hotels had
occupancy of 68.2% and ADR of RMB 396. JLL currently tracks 17
international-branded hotels in the high-end hotel market, with a total
of 5,447 rooms.
Nanjing’s hotel demand is driven by business travel as well as the
tourism and MICE (Meetings, Incentives, Conferences and Exhibitions)
travel segments. Business travel is the dominant source of demand,
underpinned by a steady stream of travellers involved with Nanjing’s
core industries. However, its MICE and tourism sectors are less
significant compared to YRD neighbours like Suzhou and Hangzhou,
which have promoted themselves more aggressively as destinations
for travel and conferences. Nanjing does not lack for well-known
attractions, but most of its visitors tend to come from Jiangsu Province
or other nearby areas, and are less likely to favour high-end hotels.
The business travellers who fill most of Nanjing’s internationalbranded hotel rooms often come from firms in heavy industries like
car manufacturing and steel, which have less generous travel budgets
compared to finance and related industries. While this can be expected
to change as Nanjing’s service sector continues to grow, for the time
being such firms’ smaller corporate accounts are restraining Nanjing’s
average ADR compared to other cities in the region, especially those
with greater shares of tourists and walk-in customers.
A downtown construction boom has impacted demand for many of
Nanjing’s hotels, and the ongoing national corruption crackdown
has affected some high-end hotels’ MICE and banqueting business.
Neither of these trends is isolated to Nanjing, however.
Nanjing’s high-end hotel stock is expected to add another 12
international hotels with 4,168 rooms over the next 3-5 years, with
major foreign brands such as Shangri-La, Grand Hyatt and JW Marriott
all set to enter the market. While business travel demand is projected
to maintain its steady rise as Nanjing’s core industries continue to
develop and the economy diversifies, there is some risk of oversupply
as a sizeable number of new hotels are added to the market over a
short period. Hotel operators are therefore hopeful that the 2014 Youth
Olympics, and its related infrastructure boom and city beautification
projects, will raise Nanjing’s profile and expand the potential pool of
future hotel guests.
34 China’s City Winners
Definition of Terms
Economic Dashboard
Real Estate Dashboard
Population: Refers to the total population living in the city in 2013, based on
estimates from the Economist Intelligence Unit (EIU). EIU estimates include
the entire population living in the city’s administrative area, rather than the
more limited registered population figure usually provided in official statistics.
Office Stock Grade A: Refers to the total completed Grade A office space
(occupied and vacant) as defined by JLL REIS China.
Metropolitan Population: Refers to the total population living inside the city’s
contiguous core urban area. Excludes the population living in satellite cities
and rural areas. Estimates from EIU.
GDP: Refers to the gross domestic (i.e. regional) product of a location.
Tertiary GDP: Refers to the portion of gross domestic product derived from
the tertiary sector (i.e. services).
Population Growth: Refers to the compound annual growth rate over the
stated period.
GDP Growth: Refers to the annual GDP growth rate over the stated period.
Airport Passengers Throughput: Refers to the number of passengers
passing through the airport, measured in millions.
Port Cargo Throughput: Refers to the volume of freight transported by
various means, measured in millions of tons.
Utilised FDI: Refers to investments made inside China by foreign enterprises
and economic organisations or individuals (including overseas Chinese,
compatriots in Hong Kong and Macau, and Chinese enterprises registered
abroad).
Exports: Refers to the value of exports by trading companies registered in
Nanjing.
GDP/Capita: Refers to total gross domestic product divided by the registered
population.
Disposable Income (China): Refers to income, after tax and national
insurance payments have been paid.
Higher Education Institutions: Refers to the number of higher education
institutions providing higher education courses and training for senior
professionals. They include full-time universities, colleges, higher professional
schools, higher professional vocational schools and others. Higher education
institutions are set up according to the central government evaluation and
approval procedures.
Total Enrolments: Refers to the total number of students enrolled at the city’s
higher education institutions. Does not include graduate students.
Unemployment Rate: Refers to the ratio of the number of registered
unemployed to the sum of number of persons employed and registered
unemployed in a location.
Average Wage: Refers to salary that is pre-tax and comprises all kinds of
income, including bonuses, allowances and payments-in-kind as reported by
the local statistics bureau.
Exchange rate of RMB 6.0675 = US$1 is used, unless stated otherwise.
Retail Stock: Refers to prime retail stock and includes department stores and
shopping malls. Does not include stock in suburban areas.
Number of Hotels: Refers to the number of international-brand hotels rated at
four or five stars, as defined by JLL Hotels.
Office Space Under Construction Grade A: Refers to the total amount of Grade
A office space in properties under construction as of time of writing.
Office Vacancy Grade A: Refers to Grade A office floor space (as a % of total
Grade A stock) in existing properties that are physically vacant and ready for
occupation.
Prime Retail Space Under Construction: Refers to the total amount of prime
retail space in properties under construction as of time of writing. Does not
include properties in suburban areas.
Prime Retail Vacancy: Refers to prime retail floor space (as a % of total
lettable space) in existing properties that are physically vacant and ready for
occupation.
Offices Grade A – Rents: Refers to open-market rents that would transact
for a typical space in the middle floors of the property, quoted on a GFA basis.
Does not include management fees.
Prime Retail – Rents: Refers to open-market rents that would transact for
ground floor space in a typical retail centre, quoted on an NLA basis. Does not
include management fees.
Logistics – Rents: Refers to open-market rents that would transact for a
typical international-standard warehouse, quoted on a GFA basis. Does not
include management fees.
Manufacturing – Rents: Refers to open-market rents that would transact
for a typical international-standard manufacturing space. Does not include
management fees.
High-end Residential CVs: Refers to typical prices (within a range) for highend residential projects in RMB per square metre.
Grade A Offices – Indicative Yields: Refers to the best (i.e. lowest) gross
(pre-tax) yield estimated to be achievable for a notional en bloc stabilised
Grade A property. Indicative yields represent JLL’s ‘market view’, based on
a combination of market evidence where available and a survey of expert
opinion.
Nanjing City Profile 2014 35
Authors
Michael Klibaner
Head of Research
JLL, Greater China
+852 2846 5276
michael.klibaner@ap.jll.com
Joe Zhou
Head of Research
JLL, East China
+86 21 6133 5451
joe.zhou@ap.jll.com
Warner Brown
Senior Manager of Research
JLL, Shanghai
+86 21 6133 5345
warner.brown@ap.jll.com
Jenson Zhang
Senior Analyst of Research
JLL, Shanghai
+86 21 6133 5724
jenson.zhang@ap.jll.com
JLL is the number one real estate research provider in Asia Pacific. A team of 100+ researchers are committed to providing best-in-class
market knowledge that enables clients to optimise real estate strategies and mitigate risks. Our award-winning research includes the flagship
Asia Pacific Property Digest (APPD) and industry-leading Real Estate Intelligence Service (REIS).
http://www.ap.joneslanglasalle.com/researchhub
World Winning Cities
JLL’s World Winning Cities programme is a multi-year research
initiative designed to draw together the essence of contemporary
city competitiveness and to predict the future city winners and losers
across the globe. The programme examines trends that will impact on
the business and economic landscape and how they are coalescing
to create the rising urban stars of the next decade. It is unique in
assessing the contribution of real estate to sustainable competitive
advantage and the implications for investors, developers, corporate
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beyond description to uncover the ‘why’ of city real estate market
dynamics.
www.joneslanglasalle.com/Pages/WorldWinningCities.aspx
www.joneslanglasalle.com/China50cities
Rosemary Feenan
Global Research Programmes
JLL
+44 20 3147 1198
rosemary.feenan@eu.jll.com
Jeremy Kelly
Global Research Programmes
JLL
+44 20 3147 1199
jeremy.kelly@eu.jll.com
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