CRI听力:Multinational Corporations Keen on China's Real Estate

Nearly 60 percent of multinational corporations which build their headquarters in Asia do so in Hong Kong or Singapore. But according to Qiu Guoming, President of Beijing Kuntin Investment Management Group, mainland cities such as Beijing and Shanghai will become the new favorites in the coming years.

Qiu Guoming, who operates a company which facilitates investments made by European and American international enterprises in China, based his estimation on the high profits these international companies have earned from the Chinese market. He cites General Electric as an example.

"GE, a typical example of American as well as European companies which have made great gains in their overseas operations, has provided us with data regarding the average annual growth rate of their profits in Asia. It is 3.5-percent. GE also says the rate in the Chinese market alone has reached as high as 23 percent for four consecutive years."

However, it's not easy for multinational corporations to find suitable locations for office buildings to conduct business in China, Qiu says. He lists some of the challenges they must face.

"Before these multinational corporations enter China, they consider where they can locate their manufacturing center. They usually first evaluate whether the local production materials, human resources, institutions, climate, environment and preferential policies are conducive to their business development before finding a suitable location. Other problems include looking for a reliable business partner in China. Also, these international corporations appear unfamiliar with efficient and effective ways to contact local governments."

To meet this increasing demand for industrial real estate in China, Qiu recommends that multinational corporations custom lease their property rather than purchasing it in order to save costs.

His proposal won support from another participant at the seminar – Laurent Fischler, Director of Investment Properties with CBRE, a leading international company that offers strategic advice and execution for property sales and leasing.

Statistics show rentals of Grade-A office towers in downtown Beijing have grown 21.3 percent year on year, now reaching 312.6 yuan per square meter per month. This has led foreign corporations to re-locate their operation bases to the outskirts of major cities or even further to second-tier cities, Fischler told the seminar.

"Recently, especially in the past 2 to 3 years, we've see the speeding-up of development of new business parks in the suburbs of Beijing BS Shanghai, which is a new trend in China although it's well-established overseas. And increasingly corporate occupiers are considering moving to less pricy locations, and their second move is transferring their headquarters to second-tier cities like Dalian or Shenyang and others."

Statistics from the Ministry of Commerce show that from January to April this year, there were 7,016 newly established ventures with foreign investments in China, making the total number of foreign ventures 745,000.

The Multinational Corporate Real Estate Strategy Seminar, held recently in Beijing, was aimed at addressing the challenges that multinational companies face in their development of a suitable corporate real estate strategy in China.

For CRI, I'm Wei Tong.