Bloomberg - Soho Says Beijing s CBD Needs Time to Digest Supply

Oct. 20 (Bloomberg) -- Soho China Ltd., the biggest property developer in Beijing s central business district, said the area needs time to digest its current supply of land and commercial property.

The CBD is quite built and there is still quite a bit of empty space that needs to be digested by the market, Soho China Chief Executive Officer Zhang Xin said today in a Bloomberg Television interview. I m a little bit surprised to see the expansion of the CBD toward the east, meaning we will need more tenants.

Beijing s municipal government in May approved plans to double the size of the CBD, 6 kilometers (3.7 miles) east of Tiananmen Square, as the Chinese capital seeks to consolidate its position as one of the country s financial hubs. Urban planning and design companies last week submitted plans for the expansion, the China Daily reported yesterday.

Enlarging the district, home to companies including China International Capital Corp. and Baker & McKenzie LLP, may create a short-term supply overhang as the current office vacancy rate in the CBD is 30 percent, Lee Wee Liat, an analyst at Nomura International Hong Kong Ltd., said by phone today.

"The long-term strategy is to ensure there s ample office space supply so they could attract the top global institutions to be based in Beijing, Lee said.

Not Time to Buy

The excess supply means it s not the time for developers to buy any more land in the CBD, said Zhang.

Soho China s shares rose 1.62 percent to HK$4.39 in Hong Kong trading at 1:45 p.m. compared with a 0.79 percent gain in the benchmark Hang Seng Index.

Soho China last month won an auction for a site in the northeast of Beijing for 4 billion yuan ($586 million). In August, the company, run by Zhang and her husband Pan Shiyi, entered Shanghai by buying an office and retail development for 2.45 billion yuan, with plans to resell the completed 52-storey tower within a month or two.

The company s presales will surpass 10 billion yuan for the first time this year, "largely because of the central government s economic stimulus plan, Zhang added. The company generates presales by selling homes prior to completion, booking the money as revenue when units are handed to buyers.

State-sponsored spending and record new loans have bolstered residential home prices in China, leading them to rise at the fastest pace in a year in September. In the first nine months of this year, sales of property including homes, offices and shops jumped 73.4 percent from a year earlier to 2.75 trillion yuan, the National Bureau of Statistics said last week.

Zhang and her husband have combined wealth of $1.9 billion and are amongst the 100 richest Chinese business people, according to the annual Hurun China Rich List released earlier this month. Pan, who founded Soho China with Zhang, is chairman of the company.