Wuhan, the capital of Hubei province, the major economic engine of central China – which is home to 10 million people) – is located in the Yangtze River Economic Belt. It is a hub for railways, roads and water transport.

The city has been well-known as a world-renowned manufacturing headquarters for companies such as Wuhan Iron and Steel (now Baowu Group) and Dongfeng Motor Corporation. But in recent years the secondary sector value-added growth has weakened amid a drive to rein in overcapacity in several sectors.

This meant a decline of 5.7 per cent in 2016, compared with 8.2 per cent in 2015, while the services sector accelerated in 2016 to 9.9 per cent, an increase of 0.3 per cent year-on-year. In the meantime, Wuhan’s construction sector witnessed a transformation from heavy to new industry.

Entrepreneurship and innovation

Innovation and entrepreneurship play important roles in Wuhan, encouraged by two important factors: talent and supporting policies. Wuhan enjoys abundant educational resources: it has the second largest number of university students currently enrolled in China, up to 1.06 million.

Furthermore, the designation of Optics Valley as a “national innovation demonstration zone” represents an attempt by the government to raise the prefecture’s profile for industry-transition and R&D capacity.

With the government’s support, 14,302 firms were established in the Optics Valley in 2017, representing growth of 30 per cent year-on-year. 20 top R&D centres were introduced including Iflytek, Hik Vision and ZTE.

Industrial transition

The high-tech industry is a focal point for Wuhan’s rejuvenation and the number of high-tech enterprises in Wuhan reached 2,177, contributing RMB 845 billion (US$131 billion) of output value in 2016. Healthcare, information technology and intelligent manufacturing are the three major emerging industries, for which output increased around 18 per cent respectively year-on-year.

It is notable that high-tech output in the Optics Valley remained strong with a 13 per cent year-on-year increase in 2016, accounting for 64 per cent of total industrial output and 20.3 per cent of GDP. However, the government should speed up the pace of metro construction in the Optics Valley, to improve the submarket’s infrastructure and communications.

Figure: Percentage change of new high-tech tenant in Grade A office

Source: JLL Research

Real estate opportunities in Wuhan

For the past two years, we saw many Grade A offices and prime shopping malls completed in this city, and some famous Hong Kong developers, apart from working on existing projects, continued to purchase large plots of commercial use land for future development.

Among them are Shui On Group, New World Group and CITIC Pacific, all showing their confidence in Wuhan’s future development and belief in the city’s commercial real estate market.

As a result, Wuhan is going through a transition period by encouraging entrepreneurship, innovation and industry upgrading, and we believe that these factors will lead to a massive demand for Grade A space, mainly from co-working and business parks. In addition, we think financial institutions, high-tech and service companies will continue to be the major sources of demand for Grade A office buildings.

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