China’s first industrial leases are expiring. Will their holders renew?

Asia World

It was 1995, and the Coca-Cola Company was eager – thirsty, one might say – to expand its already substantial presence in China.

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Urban incomes and gross domestic product were exploding, and cola sales along with them. Eye-popping figures – like the 76 per cent spike recorded in 1994 – were enough to motivate the company to form a joint venture with conglomerate Swire. The two agreed to manage the Coca-Cola business in southern China, including a mammoth bottling plant in Guangzhou.

At the time of its construction in 1983, the Huangpu district factory – the mainland’s second – was in a relatively remote corner of the city. But in the intervening years, the bustling urban centre had widened, eventually reaching the facility’s parcel. This presented a problem: a sprawling industrial site occupying prime real estate.

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To resolve the conundrum, fulfil its expansion plans and extend its tenure in what is now one of its largest markets, Swire Guangdong Coca-Cola recently secured a 50-year lease for a larger tract in the same district. Signed for around 166 million yuan (US$23.6 million), the deal guarantees a total land area of 128,000 square metres for the new campus.

This latest acquisition – a vote of confidence in the country’s prospects – comes as many contracts for commercial and industrial land, secured in the early days of China’s reform period, are approaching their end.

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