In July, the Beijing municipal government formally announced that it plans to gradually relocate some functions of the municipal government to a rising satellite city 17 km east of the city called Tongzhou. This is the latest example of a commonly-seen strategy in China to kick-start development of a new CBD area. By installing government functions in a new CBD, supporting businesses and services will follow, and this creates office demand. This provides a chance for Tongzhou to develop into an important decentralised office market in the future.

The plan

Tongzhou will play a key role in the integration plan between Beijing, Tianjin, and the surrounding cities of Hebei province called the “Capital Economic Circle” – planned to be China’s next economic mega-region. Tongzhou is close to the border with Hebei province. Placing Beijing municipal government functions in Tongzhou will likely promote more interaction between Beijing and surrounding cities. Note that the central government functions will all remain in Beijing itself and are not affected.

While the plan has been debated for decades, according to some sources, it is the improved infrastructure connectivity that has finally made the relocation of government functions to Tongzhou possible. Two subway lines now connect Tongzhou with central Beijing. Four more lines into the general area are also planned to open before 2020, making Tongzhou “closer” to the city.

The area will also accommodate businesses that are priced out – or forced out – of the city centre, based on the decentralisation plan for Beijing. Tongzhou is the closest satellite city to Chaoyang district, which holds the majority of Beijing’s office and retail stock. Tongzhou is strategically situated to emerge as a low-cost alternative for occupiers wanting large space areas which are still within convenient reach of the city, while also appealing to employees who work in Beijing or Hebei.

However, for businesses to relocate to a new area, keeping workers is challenging. Fortunately Tongzhou and nearby Yanjiao have already developed large residential populations, and this may mean a shorter commute for some people. But also, in order to make the city livable, improved public services are being planned. Several educational establishments, including Renmin University, have announced plans for new campuses or even outright relocation to Tongzhou. Some high-quality high schools and medical facilities are looking at opening branches in the area.

Tongzhou has now become a popular choice for domestic developers with many of them having already entered the area. Several office projects have appeared in Tongzhou already, but quality standards are significantly lower than central Beijing. Many tend to be strata titled. The most well-established project in the area had significant vacancy during a field visit last week. However, at this stage of development, strata title sale is still an appropriate strategy for the area. We expect to see more projects planned in the future, and Tongzhou will be a key area to watch.

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