Shanghai:
At more than 2,000 feet, Shanghai Tower is the world’s second-tallest building. It looms over its neighbours — the world’s ninth and 19th tallest buildings — in a super-cluster of supertall structures unlike any other in the world.
The only problem? Finding people to work there: Only 60 per cent of Shanghai Tower is rented out, and only a third of current tenants have actually occupied their leased space.
In this sense, Shanghai Tower signifies the end of an era. Its plight suggests some major changes are afoot in the real estate market — and, more significantly, in how the professional class lives and works in China.
For two decades, Shanghai’s skyline has symbolised China’s economic renaissance and modernisation. That’s by intention. In 1991, the local government held a competition to design a signature business district on the riverfront. The winning proposal included three super-tall buildings intended to represent the rise of Shanghai’s financial district — and of China more broadly.
If Shanghai wanted a private developer to take on such a project today, it wouldn’t be able to find one. The city’s commercial real estate market couldn’t justify the investment.
According to CBRE Group Inc., a leasing agent for Shanghai Tower, more than 600,000 square meters of new office space went on the city’s market in the first quarter of this year, with an additional 850,000 coming soon — even as rents are trending downward and vacancies are up.
That’s common in many of China’s biggest cities. Some 46 per cent of the 500-foot plus buildings under construction in the world are in China, partly spurred by local governments keen to emulate Shanghai’s skyline (just as the Shanghai government once hoped). In recent years, seemingly every aspirational Chinese city has followed the same model of highly concentrated downtowns topped by massive towers.
Yet for all its symbolic value, that model is almost certainly obsolete — and the Chinese cities of the future are likely to look very different.
One reason is that China’s breakneck urbanisation is creating cities that sprawl further than ever, leading to long commutes, reduced well-being and economic inefficiency. In 2014, the average one-way commute in Beijing and Shanghai exceeded 50 minutes — longer than in New York — while six-hour round-trip commutes are not unknown.
Surveys consistently show that long hours, including commutes, are a source of rising dissatisfaction among China’s white-collar workers. For employers, meanwhile, increased sprawl makes it harder and more expensive to connect with available labour.
Perhaps more significantly, workplace habits are changing. Older generations were raised to appreciate lifetime employment and the stability of a large organisation — precisely the sort of companies that tend to occupy tall office buildings. But millennials in China, as elsewhere, are embracing gig work, part-time opportunities and entrepreneurialism.
Co-working spaces are booming. Luring young, less wealthy workers — who typically have to live far from pricey downtowns — is a growing challenge for big companies. Likewise, creating the kind of novel workspaces that might appeal to them is difficult in a traditional office tower.
The government’s solution to these problems is to cap the populations of the biggest cities, and encourage development of so-called urban clusters surrounding the traditional city centers. Those clusters will in theory be differentiated by function (manufacturing, services, government) and less densely populated.
They’ll be connected by high-speed commuter rail (roughly four times quicker than a subway) that can avoid a crowded central hub. With pressure on downtowns reduced, the need to build taller and denser will decline, too.
In April, President Xi Jinping announced that the government would build a new city designed to siphon people and businesses from Beijing’s crowded center and serve as a model for urban development for the next thousand years. Notably, super-tall buildings aren’t part of the plan. Shanghai Tower doesn’t need to worry about being topped.
— Bloomberg
