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Smaller cities to rake up 90% of realty deals

TIER II and III cities across the country will account for a combined 90 percent of China's commercial real estate activities by 2020 as they are expected to develop robustly over the coming decade, a leading real estate services provider predicted yesterday.

"By 2020, we estimate that Tier I cities would account for only 10 percent of the country's commercial real estate activities,'' said K. K. Fung, managing director for Jones Lang LaSalle's China operations. "With massive infrastructure investments in Tier II and III cities, these markets are increasingly accessible at a time when the focus is shifting to domestic consumption from exports.''

A total of 40 cities have been mentioned in the company's latest report, China 40 - The Rising Urban Stars, as main drivers for the country's real estate market which is set to quadruple in size by 2020.

Among them, Tianjin, which has received enormous attention in recent years as a result of the development of its Binhai New Area, is believed to have the greatest potential to become China's fifth Tier I city after Beijing, Shanghai, Guangzhou and Shenzhen. Foreign direct investment in Tianjin hit US$5.3 billion in 2007, the third highest in the country after Shanghai and Suzhou, Jones Lang LaSalle said.

The company said opportunities in the Tier II and III cities will remain huge on strong long-term fundamentals.

In particular, Chengdu, Shenyang and Wuhan offer best all-round potential while Tianjin, Changsha and Chengdu have been selected as the biggest potential winner in the office, retail and logistics sectors, respectively, according to the report.

The Tier II and III cities, unlike their gateway counterparts, have been less affected by the global economic turmoil and continue to attract attention from global investors.

Europe's biggest hotel group Accor SA, which said business in tertiary cities, rather than gateway cities, was extremely good over the past year despite the gloomy global economic situation and a slowing domestic economy, is planning to more than double its China presence over the next few years focusing on second and third-tier cities.


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