Inquiring minds are reading Beijing’s Olympic building boom becomes a bust.
Reporting from Beijing — “Empty,” says Jack Rodman, an expert in distressed real estate, as he points from the window of his 40th-floor office toward a silver-skinned prism rising out of the Beijing skyline.
“Beautiful building, but not a single tenant.
Beijing went through a building boom before the 2008 Summer Olympics that filled a staid communist capital with angular architectural feats that grace the covers of glossy design magazines.
Now, six months after the Games ended, the city continues to dazzle by night, with neon and floodlights dancing across the skyline. By day, though, it is obvious that many are “see-through” buildings, to use the term coined during the Texas real estate bust of the 1980s.
By Rodman’s calculations, 500 million square feet of commercial real estate has been developed in Beijing since 2006, more than all the office space in Manhattan. And that doesn’t include huge projects developed by the government. He says 100 million square feet of office space is vacant — a 14-year supply if it filled up at the same rate as in the best years, 2004 through ’06, when about 7 million square feet a year was leased.
“The scale of development was unprecedented anywhere in the world,” said Rodman, a Los Angeles native who lives in Beijing, running a firm called Global Distressed Solutions. “It defied logic. It just doesn’t make sense.”
The government spent $43 billion for the Olympics, nearly three times as much as any other host city. But many of the venues proved too big, too expensive and more photogenic than practical.
The National Stadium, known as the Bird’s Nest, has only one event scheduled for this year: a performance of the opera “Turandot” on Aug. 8, the one-year anniversary of the Olympic opening ceremony. China’s leading soccer club backed out of a deal to play there, saying it would be an embarrassment to use a 91,000-seat stadium for games that ordinarily attract only 10,000 spectators.
The venue, which costs $9 million a year to maintain, is expected to be turned into a shopping mall in several years, its owners announced last month.
A baseball stadium that opened last spring with an exhibition game between the Dodgers and the San Diego Padres, is being demolished. Its owner says it also will use the land for a shopping mall.
All around the Olympic complex, there are cavernous empty buildings, such as the main press center for the Games, that still await tenants.
A shopping arcade that stretches for a quarter of a mile across the street from the complex is empty, the storefronts papered over with signs reading “famous stores corridor.”
“They wanted to build ‘the world’s biggest this’ and ‘the world’s biggest that,’ but these buildings have almost zero long-term economic benefit,” economist Huang said.
Moreover, the makeover of Beijing for the Olympics led to an estimated 1.5 million residents being evicted from their homes, according to the Geneva-based Center on Housing Rights and Evictions.
In this vibrant capital city of 17 million, there is an insatiable demand for housing, yet prices remain far out of reach of most residents. American-style free-standing homes are being advertised for more than $1 million in gated communities with names like Versailles, Provence, Arcadia and Riviera. Within the Fourth Ring Road, a beltway that defines the central part of the city, two- and three-bedroom apartments are offered for $800,000 in compounds named Central Park and Riverside.
“These are like New York prices, but we are Chinese. We don’t have that kind of money,” said Zhang Huizhan, a 55-year-old businessman who owns a Chinese furniture factory. He has been looking for five years for an apartment for him and his wife within their budget of $150,000.
The average salary in Beijing is less than $6,000 a year.
“Harina R” writes I was in China for the Olympics and was astonished at how many building were empty. It was all too obvious.
In response to Inside China: A Sculptor’s View “Steven H” writes:
I was in China in Spring 2008. I agree with what you wrote. Most development projects build 3 to 6 buildings simultaneously, most of them at least 30 stories tall. As we drove around China, there would almost always be a cluster of these
buildings going up, within eyesight distance through the smog.
They thought the migration to the cities was so huge that all this capacity would be needed. It’s not.
China’s jobless return to countryside
Reuters is reporting China’s jobless migrants loath to return to countryside
The parched farmlands of central China hold no future for Li Honglin, but she is trapped there until word comes from a clothing factory far away on the coast where she used to work.
Li’s boss promised to call her back to her job as a sewing machinist when the factory resumes full production. It’s not clear when that might happen, though, as China’s garment exports have been decimated by the economic downturn and orders are thin.
Wearing tight pants and high-heel shoes studded with rhinestones, Li stood with her parents and elderly neighbors as they played mahjong late into the afternoon by a dusty road about an hour’s drive from Henan’s provincial capital, Zhengzhou.
“Almost all my friends have already gone back to the big cities, but I’m not rushing out. You need to have a job to live in the city. It’s too expensive to get by without one,” she said.
“It’s no good. I had found work by this time last year but I’ve had no opportunities, nothing, so far this year,” said Zhao, Xichang, standing by a hand-painted sign that advertised his skills as a driver at a job market in Zhengzhou.
Long lines of migrants, mainly men in rumpled suits, snaked down the street just a few minutes’ walk from the train station, each with a sign like Zhao’s. There were chefs and drivers, electricians and builders, plumbers and handymen.
A wrinkled man in a cloth cap sat at a corner table, charging half a yuan ($0.07) to paint job-wanted signs for the illiterate.
Rumors spread about where there might be more work. One man said Beijing. Another scoffed, saying he had left the capital because its economy had turned sour.
“People here barely have enough to eat. And it’s going to be bad for society if the situation doesn’t improve,” Zhao said. Not that there would be protests, just unhappiness, he quickly added.
China’s insatiable demand for commodities we all heard about was nothing but a global crack-up boom, a byproduct of cheap money everywhere. Ironically, right at the height of the boom, many thought $200 oil was in the cards and hyperinflation was just around the corner. It wasn’t then and it isn’t now.
And with wages being what they are in China, there is no hope that China can fill those real estate vacancies at a profit, if indeed at all. Signs point to a crash in China’s GDP (assuming it hasn’t already). Alternatively, China will overheat if it attempts to grow at the same pace. Either way, there is more pain for China and the world economy right around the corner.
Mike “Mish” Shedlock
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