Archive for March, 2010
The cost of relocation in central Beijing is skyrocketing. Relocation, or ??, is frequently fraught with distress, violence, and corruption. In Beijing, at least inside the second ring road, the compensation levels have skyrocketed, in large measure due to a combination of the rise in Beijing real estate prices and the restraint now generally shown by the government when it comes to moving people from the center of Beijing. It was not always like this, it is still far from perfect, and outside the center of Beijing relocations are frequently handled differently.
I learned Friday that Gehua Cable, whose office building is at XiaoJie Qiao (???), is expanding. They are paying 130,000 to 150,000 RMB per square meter to residents of the 1-story homes and buildings that will be torn down. Last year residents near the south entrance of Nanluohu Xiang whose buildings were in the way of a new subway line were rumored to have received 100,000 RMB or more per square meter. For obvious reasons the government and the developer prefer not to have public confirmation of the exact figures.
I also recently chatted with someone who works with the Beijing government on relocation issues. This person told me that some people have gotten close to 200,000 RMB per square meter. Those people tend to be on one of the new subway lines running through the city. This person also had been told explicitly that under no circumstances does the government want to see force used to move people inside Beijing’s center. This was not the model in the past, and maybe it will not hold, but I think it may actually be the case now in the heart of Beijing.
Today The Telegraph published a story on plans to “restore” the Gulou District, one of the last remaining old parts of Beijing. Concerned residents and groups, including the Beijing Cultural Heritage Protection Center (??????????) had organized a meeting to discuss the development, but as the Global Times reports, the police “squelched” that meeting. The Telegraph reports that the “restoration” will cover 30 acres, or over 120,000 square meters. Some of the residents live in pretty atrocious conditions and have very good reasons to suppost the project.
There are clearly powerful interests behind the Gulou redevelopment. But if they have to move residents from even half the 120,000 squre meters, or 60,000 meters, the relocation costs may be prohibitive. At 100,000 per square meter the compensation for those 60,000 square meters would be 6 Billion RMB (using 10.76 square feet per square meter and 6.82 RMB to 1 USD, the equivalent cost per square foot at 100,000 RMB per square meter is approximately $1,365). As I discussed above, 100,000 RMB per square meter for such a great location is too low. Perhaps I am guilty of wishful thinking, but I think the relocation cost alone has gotten so prohibitive that this project either will not happen or will be dramatically scaled back.
I have been working on a long post about the Beijing real estate market. It is not an easy topic, especially when you get into the bubble or not a bubble discussion. I think that prices within the 3rd Ring road in Beijing, at least north of Chang’an Jie (disclosure: I own a property inside the 3rd ring road north of Chan’an Jie), are not unreasonable when you consider the size of Beijing (22 million people; the plan was to have 18 million in 2020), the outward sprawl that will cause Beijing to eventually rival the Greater Tokyo Metropolitan Area in size, and the skyrocketing costs of relocating current residents to make way for new projects.