Recent years have seen maturing urban infrastructure combine with strong office and retail demand to give rise to new commercial clusters along the periphery of Shanghai’s city centre. One of the most prominent emerging areas is Hongqiao, which has a unique history. Hongqiao, previously an important office and retail area in Shanghai, faded from prominence in the 1990s, but today returns stronger than ever. New developments are restoring Hongqiao to its former prominence.
Once a rural area in western Shanghai, Hongqiao was designated as a state-level development zone in 1986. Authorities took advantage of the zone’s location between Hongqiao Airport (Shanghai’s only international airport at the time) and Shanghai’s traditional centre to develop a commercial hub with exhibition space, offices, hotels, and diplomatic facilities. The 1990s saw a wave of development that cemented Hongqiao’s rise as one of Shanghai’s key early business districts. More than ten office towers were built, and the zone attracted a range of multinational companies like 3M, Chrysler, GE, and LG. In addition, at least half a dozen foreign consulates were established in the area. Hongqiao’s Friendship Department Store opened in 1994 and became the most high-end retail property in Shanghai, with international brands and imported products. As other areas like Lujiazui (the financial district) and Xujiahui (in the southwest) took centre stage in the late 1990s and early 2000s, demand and supply in Hongqiao’s office and retail sectors declined, and Hongqiao’s brightness began to fade (see chart below). The turning point came in 1999 when Pudong International airport, 60 km east, took over all international flights to Shanghai.
Hongqiao is experiencing a surge of construction of prime office and retail space that is giving it a new lease on life. Notable new mixed-use projects include L’avenue by LVMH, The HQ (Shanghai City Centre) by Treasury Holdings, GIFC Phase II (Takashimaya) by Gubei Group, Jin Hongqiao by APP and SOHO’s Tianshan Road Project. All of these have just completed or will complete within the next three years, doubling the retail stock of the area. We reclassified Hongqiao from a decentralised area to a part of Shanghai’s CBD in 2011, due to the comprehensive upgrade of the area’s business environment. For example, L’avenue will be home to the first Louis Vuitton and Tod’s stores in west Shanghai. Meanwhile, the commitment rate of GIFC Phase II’s office portion (70,000 sqm) has already exceeded 60%, higher than the average of other CBD projects that delivered in the same quarter.
Hongqiao’s profile will be further boosted by the rising prominence of the west Shanghai region, which is underpinned by the new Hongqiao Transportation Hub, including a hugely expanded airport. Tenants are attracted to Hongqiao for its new properties, strong government support, and large, wealthy population base. As a result, we expect that Hongqiao’s rental performance will remain sound and will experience stronger rental growth than most areas in Shanghai.
Source : Jones Lang LaSalle, Real Estate Intelligence Service
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