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News Release

Hong Kong and Macau

40 Tier II and III cities across China offer opportunities for property occupiers, investors and developers over the next decade

Follow up to Jones Lang LaSalle’s first comprehensive industry research on China’s Tier II and III cities in 2007

Jones Lang LaSalle released its latest research <China 40 – The Rising Urban Stars> today, highlighting the opportunities for property occupiers, investors and developers in 40 Tier II and III cities, the China 40.
 “By 2020, we estimate that Tier I cities would account for only 10% of China’s commercial real estate activity, which serves to highlight the massive opportunities in Tier II and Tier III cities over the coming decade,” noted KK Fung, managing director for Jones Lang LaSalle Greater China. “Produced in response to the strong continued interest in China’s Tier II and Tier III cities, our latest report aims to provide strategic context for real estate players who are prepared to look beyond China’s Tier I cities.”
The 40 cities were identified through an evaluation process which started with 275 cities across China. “We analyzed the 275 cities based on a range of demographic, economic, business, infrastructure, technological and labour market factors,” noted Mr Fung. The top 100 highest-scoring cities were then positioned on Jones Lang LaSalle’s City Evolution Curve through an analysis combining economic and real estate indicators. The 50 highest-ranking cities were then analysed in detail, incorporating the views of our team of market practitioners, resulting in 40 short-listed rising urban stars – our China 40. 
A framework was developed to assess how each of the China 40 cities will evolve as interesting locations for the real estate community. We consolidated our intelligence, information and views to create a city evolution curve and clustered the China 40 cities into three stages – growth, early adopters and dormant. The report highlights the opportunities in the different stages (see Fig 1).
Fig 1: City Evolution Curve
“China’s Tier II and Tier III cities continue to grow and experience dynamic development. With massive infrastructure investments, these markets are increasingly accessible at a time when the focus is on domestic consumption rather than export-oriented,” noted by Michael Klibaner, head of research for Jones Lang LaSalle, Shanghai.
Key factors driving and shaping China’s cities and real estate markets are government policies combined with the up-skilling of China’s labour force and continued infrastructure investment. The report provides an in-depth assessment on how these three factors will stimulate future growth.
In addition, the report assessed how China’s structural changes would impact specific commercial real estate areas, and identified the likely real estate winners for the main property sectors.

Office: Tianjin and Chongqing have visions to become the economic centres of northern and western China respectively, and Nanjing is gaining status as a rising location for regional headquarters.
Logistics: Chengdu, Qingdao and Zhengzhou all possess significant logistics potential with their strategic locations, access to large population bases and growing roles as railway hubs or ports.

Retail: Changsha, Wuhan and Wenzhou possess relatively undeveloped retail markets, but are well positioned to undergo a period of substantial growth.
“Whilst the economic slowdown is clearly affecting the short-term prospects of China’s Tier II and III cities, we are confident the China 40 will offer significant opportunities with long-term fundamentals remain strong,“ added KK Fung, “Unlike Tier I cities, these 40 cities are somewhat sheltered from the global economic storm, and will have a greater focus on the domestic market.”  The report also addresses the impact of the recent Economic Stimulus Package and the Rural Land Reform on the China 40 and assesses the prospects for real estate investment in these cities.