Shanghai is a city located on the Eastern Coast of China that has grown to be one the financial powerhouses of the industrialized world. The urban population growth trend can be explained by the fact that much of the rural population is increasingly migrating to the urban centers in search of economic opportunities. The Pudong are has also been responsible for an extraordinary share of the population growth in Shanghai. For example, there was a fifty six percent increase in the population from a little over three million in 2001 to roughly five million in 2011. This real estate development project consists of a structure that will be composed of twin towers that will reach the planned height of 250m and be attached by a podium. The project's financial calculations estimate an internal rate of return would be nearly thirty percent (26.88%) and the net present value of the project would approximate seven hundred million USD or over four billion in Renminbi. Therefore, given the limited risk involved with this project it is highly recommended as a worthwhile investment.
Shanghai Development
Shanghai Entrepreneurial Real Estate Development Project
Shanghai is a city located on the Eastern Coast of China that has grown to be one the financial powerhouses of the industrialized world. The urban population growth trend can be explained by the fact that much of the rural population is increasingly migrating to the urban centers in search of economic opportunities. The Pudong are has also been responsible for an extraordinary share of the population growth in Shanghai. For example, there was a fifty six percent increase in the population from a little over three million in 2001 to roughly five million in 2011. This real estate development project consists of a structure that will be composed of twin towers that will reach the planned height of 250m and be attached by a podium. The project's financial calculations estimate an internal rate of return would be nearly thirty percent (26.88%) and the net present value of the project would approximate seven hundred million USD or over four billion in Renminbi. Therefore, given the limited risk involved with this project it is highly recommended as a worthwhile investment.
Project Location and Site Information
Shanghai is a city located on the Eastern Coast of China that has grown to be one the financial powerhouses of the industrialized world. The city has grown to a population of over twenty four million people. Furthermore, the city and its population have been estimated to be subjected a growth rate of seventeen percent over the next ten years (Subbotin, 2010). The population growth in Shanghai is not dependent on the growth of the Chinese population as a whole. In fact, due to the one child policy and the strict punishments that are given for breaking this policy, the population growth in Shanghai exceeds the domestic growth rate by an order of magnitude (The Economists, 2012). This trend can be explained by the fact that much of the rural population is increasingly migrating to the urban centers in search of economic opportunities.
Within the city of Shanghai, the specific area in which the project has been prepared for is located within the Shanghai Pudong Lujiazui Central Financial District which is a national financial development area located in Shanghai Pudong New District. Lujiazui is the only financial trade zone in China, with more than 30 high rise buildings and over 520 domestic and overseas financial and insurance corporations located within. The Pudong are has also been responsible for an extraordinary share of the population growth in Shanghai. For example, there was a fifty six percent increase in the population from a little over three million in 2001 to roughly five million in 2011. This has also resulted in the highest population density in Shanghai at about ten thousand people per square mile. Furthermore, the estimate population is expected to reach the ten million people by the year 2050. Needless to say, real estate in this district is among the highest demanded properties in the world.
Figure 1 - Shanghai Office Market in 2015
Project Financials
The above-grade GFA for the site will approximate 290,000sqm of which nearly 50,000 can be utilized as rentable retail space and nearly a quarter million rentable office spaces. The structure will be composed of twin towers that will reach the planned height of 250m and be attached by a podium. The primary goal of the Ruibo Project is to become the landmark of Riverside Financial City. The building is designed not only to stand the test of time but to also utilize the most advanced and environmentally friendly construction technics. The exterior can be finished with either stone, aluminum, or a finish to provide a modern, classic, and graceful aesthetic appeal that is worthy of the landmark status. Furthermore if the building is able to achieve a landmark status is will also command a market premium.
Determining the potential gross income of the project is conducted by considering the total space available to rent and the average rent estimated to be received by this space. A vacancy rent of ten percent is considered although given the demand for property in this district this is probably a conservative figure. Furthermore, a rent escalation of five percent is also assumed given the time value of money and inflation however property in this area could achieve an even higher rent escalation if it is driven by demand.
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