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Andrew Collier

Roads and two underground rail lines planned to meet the needs of a growing population as the city decentralises

The Beijing government is to spend more than 20 billion yuan (HK$18.7 billion) developing the infrastructure of the  new central business district (CBD), one of the largest urban makeovers in recent history.

The money is for  10  roads and two underground rail  lines, along with  parks and schools, said  Zhang Weigang,  division chief of the CBD Administrative Commission.

The CBD  is a section of central  Beijing east of Tiananmen Square that has been designated as the city's new area for multinational corporations and high-end residences. The 3.99 square kilometre  area is being cleared of ageing  textile factories, railroad workshops and apartment blocks to make way for as many as 20  business, residential and retail developments.

The  total investment will exceed US$20 billion, according to estimates from developers and property agents. Construction began two years ago and most of the area is scheduled to be completed in time for the 2008 Olympics.

City officials view the CBD as a way for Beijing to create an image  as a modern capital on a par with London, Paris or New York.

'The CBD reflects a will to demonstrate that Beijing is moving on,' said Barry Ball, chief architect for Hong Kong property developer HKI Group, which is assembling the area's largest mixed business-residential site, Fortune Plaza.

'Beijing is a political city,' said Kevin Liu,  director and chief representative in China of Aedas,  an  architectural firm based in Britain.

The master plan for the CBD was approved in 1993 but it was not until 1998 that an area of Beijing was chosen.  Half of the sites will contain offices, with the rest equal parts residential and retail.  About 30 per cent has been completed.

When finished, the CBD will contain 40,000 to 60,000 residences and 300,000 employees of multinational and local businesses.

'Multinationals tend to have marketing and sales in the CBD area,' said David Hand, managing director of Jones Lang LaSalle in Beijing.

The CBD will stretch from Dongaqiao Lu in the west to Xidawang Lu in the east, and from Chaoyang Lu in the north to the Tonghui river in the south.

However, some question whether all developers will meet construction deadlines. The government imposed tighter restrictions on bank lending  in July. Developers must put up 30 per cent of the equity and cannot pre-sell flats until the roof is completed, rules likely to cause some developers to drop out.

'I think it will be difficult for some of the developers to deliver,' said Howard Zhang, investment manager for Rodamco Asia Management, a property  investment company.

'The smaller developers may have funding problems.'

The plan has not been without controversy. Thousands of residents were removed from their homes  and  residents question whether Beijing's troubled  transportation system can handle  more apartment dwellers and office workers.

At present, the CBD area is a maze of construction and half-built projects. The cost  includes US$2.4 billion for infrastructure, with spin-off benefits elsewhere in the city; an estimated US$15 billion in buildings;  and US$6 billion for the land,  developers said.

Will these projects make money? There is a glut of grade-A residential and office space in Beijing. Jones Lang LaSalle estimates that vacancy rates in the Beijing office market rose to 18 per cent in the second quarter from 13 per cent in the first quarter. Residential rates jumped to 26 per cent, which was partly attributable to Sars.

As a result, average selling prices have fallen 1.9 per cent a year, or 5.6 per cent since 2000,    according to JP Morgan Chase analyst Douglas Sung.

Brokers estimate  Beijing has 3.4 million square metres of grade-A office space. Although the CBD is estimated at 10 million square metres, only half of this is office, and about 30 per cent  is likely to be grade A. That would mean an 88 per cent increase from  existing levels.

However, most of the new buildings  will not be completed until 2008, an annual increase of about 12 per cent.



Beijing approves $18b CBD makeover