In the midst of the largest-ever development stage for Beijing’s CBD, a number of developers behind the superblock of office buildings set to comprise the CBD Core Area have found themselves unexpectedly revising plans to ensure that their towers reach new heights – ones much lower than previously planned. This comes as authorities push ahead with plans to decentralise the city.
In late 2017, news first surfaced that Beijing’s municipal authorities were implementing building height caps of around 100 to 180 metres for office towers in the CBD Core Area. As of early 2018, buildings with completed exteriors – which already surpass the height restrictions – have been granted exceptions. Set to serve as Beijing’s tallest landmark, China Zun, for example, is still expected to stand at 528 metres upon completion in 2019.
But for nine of the 18 planned buildings that have yet to break ground in the CBD Core Area, the exemption does not apply. Previously slated to double the amount of CBD Grade A stock in Beijing to 1.8 million square metres upon completion in 2025 and beyond, the CBD Core Area is now forecast to see its GFA reduced by as much as 30 per cent or as little as 14 per cent – to 1.27 million square metres or 1.57 million square metres.
Source: JLL Research
The new rule is not expected to have much impact on the near term: the CBD Core Area is set to unleash a supply wave – of nearly 1 million square metres – by 2020. The reduction to future supply, however, is likely to see landlords in the area gain from improved bargaining power over the horizon. Implications for developers will be better understood once negotiations on compensation are settled.
As the market further digests the news and policy is formalised, projections will continue to shift accordingly. Yet, despite any present uncertainty, one thing is clear: the office market represents one of the latest stakeholder groups in Beijing to be affected by the city’s increasing focus on decentralisation.
The restriction on building heights comes after new commercial developments within the Fifth Ring Road were prohibited as early as 2014 in a bid to prevent future supply growth in urban areas. Now, the height limitations are effectively cutting the upper-limit of office supply development in the city centre, increasing the pace at which development will be focused on the outer edges of Beijing.
As over-crowding continues to be a strain on infrastructure and resources, particularly in the highly congested CBD, authorities want to relieve pressure to help the city reach its full potential as a world capital. Reducing office space in the CBD Core Area – previously projected to add some 200,000 daily workers to the CBD by 2025 – is likely to shrink future crowds in the CBD, where an estimated 400,000 white-collar workers and support staff already push above-ground and underground transport systems to their limits.
Following the decision to relocate non-capital functions to Tongzhou and develop distant Xiong’an into a new state-level support hub for Beijing – and taking into account recent government efforts to depopulate the city – this latest move further connects the dots, drawing the CBD Core Area into Beijing’s wider vision for decentralisation.
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