China's Pearl River Delta Infrastructure Projects to Drive Local Economies

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According to CBRE recently released Greater Pearl River Delta Infrastructure Outlook report, which explores how infrastructure projects in the Greater Pearl River Delta (GPRD) will foster long-term development in the commercial real estate market and contribute to economic development of the region -- future cross-border infrastructure will enhance people, capital and trade flows between Hong Kong, Macau and leading Southern China cities, thereby shaping a Greater Pearl River Delta megalopolis.

"The GPRD has geographical advantages sitting on China's 'southern gate' which connects it to the rest of the world. This, combined with the international business environment and support from the state, presents a positive outlook for the entire GPRD region," said Marcos Chan, Head of Research, CBRE Hong Kong, Southern China and Taiwan.

The ongoing and under-planning infrastructure schemes in the GPRD--which include several large-scale cross-border infrastructure projects implemented by the Hong Kong government, and a number of high-speed railway, intercity trains and highway construction projects in cities such as Guangzhou, Foshan and Shenzhen--will be essential in driving city integration by enhancing the flow of capital, people, goods and services.

"New infrastructure projects will help to better distribute resources in the GPRD, and in turn will help alleviate the shortage of space and resources in Hong Kong and Macau. They will also assist traditional industries to transform and climb the value chain. Additionally, enhanced transportation can also accelerate urbanization in fringe cities, while relieving pressure associated with megacities," said Mr. Chan.

The Guangzhou-Shenzhen-Hong Kong Express Rail Link is one example of how new infrastructure will positively impact the region's commercial real estate market. As more Chinese companies pursue internationalization, an increasing number of mainland companies will expand in Hong Kong, driving long-term demand for office space. The Express Rail Link will shorten the travel time of business travelers between Hong Kong, Shenzhen and Guangzhou from over two hours to one hour.

"This one-hour commuting circle between metropolitan areas and two-hour commuting circle across the region will enhance the feasibility of corporations in Hong Kong by relocating their middle or back office operations to major PRD cities. It will also expedite two-way labor mobility between Hong Kong and the mainland," said Mr. Chan. "Providing a convenient and fast means of transport between Hong Kong's West Kowloon and Guangzhou via Shenzhen, it will prompt stronger demand for office space in and around West Kowloon. Moreover, it will promote frequent travel and narrow the lifestyle gap between Hong Kong, Macau and PRD cities."

Infrastructure activity such as this will help nurture the development of the region as an international megalopolis. In contrast to other megalopolises in China, the GPRD has three major economic centers-- Guangzhou, Shenzhen, and Hong Kong--which are all combining to drive the region in a way that will make it a key economic hub for China as a whole.

"The improved transport infrastructure will help drive the development of the Guangdong Free Trade Zones, providing seamless connection with Hong Kong and Macau, effectively accelerating population growth and improving the region's productivity. The GPRD will emerge into a world-class megalopolis, one that will attract strong real estate occupier demand and offer property investors with enormous opportunities," added Mr. Chan.

Beyond China itself, the GPRD will also play a crucial role in China's Belt and Road initiative, which will see the construction of a large number of new cross-border infrastructure works across Asia, the Middle East, Africa and Europe. With extensive experience in the construction and operation of cross-border infrastructure, CBRE predicts that the GPRD could provide consultancy services related to project engineering, arbitration, insurance, legal and other professional services for the Belt and Road initiative.