Growing pains for Beijing's business heart

Contractors top out a building in Beijing's Central Business District.The CBD will be extended to East Fourth Ring Road, with Chaoyang North Road as the northern border and the Tong Hui River at the southern edge. Asianewsphoto

Helen Chen is hesitant about whether to quit or stay.

She works in Beijing's Central Business District (CBD), where she suffers the frustration of chronic traffic jams and a high cost of living.

But the single 28-year-old woman also is reluctant to give up a decent salary for a Fortune 500 company.

She also enjoys living in an area with a reputation as a high-quality neighborhood with convenient shopping and entertainment venues.

"For young people, working in the CBD implies both a good start and a bitter life," Chen said.

The administrator of Beijing's CBD is concerned about how to keep the area's corporate residents from moving to less congested neighborhoods or cities.

CBD expansion

Liu Chunchang, deputy director of the Beijing CBD Administrative Committee, said plans are being developed to expand the CBD by 3 sq km to reduce traffic jams and attract more corporate citizens.

The current CBD, covering 3.99 sq km of eastern downtown Beijing, will be extended to East Fourth Ring Road, with Chaoyang North Road as the northern border and the Tong Hui River at the southern edge.

A media complex and premium theater are in the design stages, but other proposals remain under discussion, Liu said.

"Our investment will be 7 billion yuan in the coming 10 years, which is expected to generate 70 billion yuan in economic benefits and create about 150,000 new job opportunities," Liu said.

Liu said contributions to the CBD expansion from government and business sources are expected to total 15 billion yuan this year.

Liu said planned projects include public transportation system construction and renovation, telecommunications infrastructure installment and real estate development.

Leaving the CBD

Beijing's CBD has become a corporate headquarters hub since 1998. By the end of last year, office properties in this area totaled 77.

More than 15,000 businesses and other institutions had established offices in the CBD by the end of 2008.

They included 130 Fortune 500 companies, 230 overseas financial institutions and 36 headquarters of transnational companies.

But due to the global financial crisis, the CBD's serious traffic jams and recent emergence of business centers in other parts of Beijing, some companies are leaving.

Motorola moved to Wangjing in northern Beijing last year.

Jerry Lu, a Motorola employee, said he would not miss traffic jams that turned his daily 7-km route to work into a two-and-a-half hour commute.

"The traffic jams there are terrible," Lu said.

But Lu added that while Wangjing does not have the traffic jams of Beijing's CBD, he misses being close to shopping and entertainment venues.

According to real estate management and consulting house Savills, the gross A-grade office supply in Beijing totaled 7.8 million sq m in the first quarter of this year.

The vacancy rate was 19.4 percent, an increase of 3.9 percent compared with a year earlier.

Meanwhile, the monthly rental rates on average dropped 6.2 percent to 177.5 yuan per sq m.

Savills projects that the vacancy rate will remain in the 20-percent range for the rest of this year, which may force continuing decreases in rental rates.

Sources from multinational property adviser DTZ also said there is an oversupply of A-grade level office space in the CBD.

During the first quarter of this year, four high-end new office properties brought a fresh supply of 327,000 sq m to the capital city. Two of those properties are in the CBD with building areas of 227,000 sq m.

About 35 percent of the A-grade office property was idle during the fourth quarter of 2008, which DTZ estimated was higher than a year earlier.

Considering reports of the oversupply and dropping rental rates, is now the time to begin expanding the CBD?

The answer from Wu Guiying, vice-governor of Chaoyang District, where Beijing's CBD is located, is yes.

"The 3 sq km expansion will make construction of an integrated transportation system available, which may help resolve our traffic jam headaches once and for all," Wu said.

The expansion will incorporate intelligent traffic forecasting, management and control systems, he said, and include more transportation alternatives connected to existing networks.

Among the additions will be more north-south access roads to ease traffic congestion on main roads, and also more covered pedestrian walkways.

Subway lines will be expanded, too, he added.

Long-range view

Wen Shengmei, a professor at Beijing's Capital University of Economics and Business, said the changes would greatly improve the CBD.

Following the 10 years spent developing the existing CBD, the area became a hub for luxury restaurants and shopping venues.

"Other facilities such as open sports yards, large theater and small green parks located throughout the new CBD area supplemented those in the existing area," Wen said.

Liu of the Beijing CBD Administrative Committee said the current oversupply of office space in the existing CBD would not affect the expansion.

The new offices will focus on attracting emerging industries, he said.

"Despite the global financial turmoil, many transnational banking, investment and financial businesses regard China as a harbor," Liu said.

The existing CBD introduced 484 new corporate residents in the first quarter of this year, including Ping'an and PricewaterhouseCoopers, Liu said.

(China Daily 07/13/2009 page10)