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Shanghai turns industrial parks into innovation high-ground

Updated: Oct 31, 2023 By WANG YING in Shanghai China Daily Print
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Photo taken on July 29, 2022, shows buildings on both sides of the Huangpu River in Shanghai. [Photo/VCG]

As Shanghai is building itself into an innovation center with global influence, industrial parks are seeing more opportunities as an important sector to attract and hold industrial corporations, a recent report said.

"Shanghai's industrial park market has played a major role in promoting the city's innovative development as it gathers together many high-quality industries. The structural transformation of economic development is driving high-tech industries to grow more rapidly, which increases the importance of industrial parks in attracting high-tech and scientific innovation businesses to settle," said Yao Yao, head of research for JLL China.

A white paper was released on Tuesday by global real estate advisor JLL in a bid to understand the needs of industrial park tenants, study the sector's short-term supply pressure and long-term industrial development, and discuss the trends and opportunities of the industrial park market in the future.

The white paper is based on an analysis that surveyed more than 3,600 enterprises in up to 200 industrial parks, over 100 corporate tenants and more than 60 investment institutions.

According to the white paper, industries including integrated circuits, life sciences, artificial intelligence, new energy vehicles and gaming have become driving forces of Shanghai's industrial park leasing demand.

In the past two years, the five major industries contributed up to 70 percent of the city's industrial parks' new leasing demand, supporting Shanghai's rank as tops in the nation in these sectors, said Ding Ting, research director with JLL East China.

Among them, the sales revenue of Shanghai's integrated circuit industry surpassed 300 billion yuan ($41 billion) in 2022, accounting for more than one-quarter of the nation's total. Considering the sector's wide application scenarios ranging from automotive electronics and artificial intelligence to consumer electronics, medical equipment and more, there are huge opportunities for integrated circuit enterprises to grow, Ding said.

Likewise, Shanghai is one of the nation's most influential hubs for the life sciences industry by possessing the greatest number of listed companies and foreign-funded research and development headquarters among all Chinese cities. The industrial scale of Shanghai's life sciences sector reached 853.7 billion yuan in 2022 and is projected to exceed 1 trillion yuan by 2025.

Regarding the city's high-quality industrial foundation, abundant scientific research talent and R&D platforms — as well as its leading clinical hospital resources and convenient financing channels — Shanghai has formed a sophisticated ecosystem of life sciences, and its abundant market demand will continue to drive the sector's stable development in the future, Ding said.

According to Ding, along with technological advancements, the boundaries between different industries are blurring and there is increasing integration and intersections between industries.

The survey results showed that up to 36 percent of the enterprises in Shanghai's industrial parks span two or more industries, indicating a growing trend of cross-industry development, Ding added.

Research also uncovered tenants' rising concerns for cost reductions and efficiency improvement on the backdrop of economic restructuring and transformation.

Yu Zeren, head of business park services for the JLL Shanghai office leasing advisory, said 89 percent of tenants believe there is room for improvement in property conditions and asset management services of the industrial parks where they are located. Among them, 71 percent hope the property quality and facilities will be upgraded, while 43 percent expect further enhancement in asset management services.

The importance of industrial services is becoming more significant due to tenants' diversified requirements for industrial upgrading. Whether the industrial park operator can provide corporate tenants with enriched industrial resources is a core concern, and business park operators need to incorporate asset management services into their operations and better adapt to tenants' needs, Yu said.

Despite short-term pressure, investors remain optimistic about investing in Shanghai's industrial parks as more than 70 percent of investment institutions have made their deployment into the market, with 89 percent of investors expected to make additional investments or consider acquiring industrial park properties in the next three years, the survey said.

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