A subsidiary of China’s largest construction group has suspended work on one of the nation’s tallest skyscrapers after the developer became the latest in a string of companies to default on a payment.
The default highlights the growing challenges faced by China’s construction groups as the slowing economy trims credit supply, putting the once runaway mega-tower building boom under stress.
In an October 30 letter seen by the Financial Times, China Construction Third Engineering Bureau Co said it would halt construction on a 475m-high (1,558ft) skyscraper in the central city of Wuhan. It said Greenland Group, one of the nation’s largest property companies, had failed to make “a significant” project payment.
Other cash-strapped property developers have also been struggling to keep their tall-building projects afloat. FT research reveals that construction of more than a dozen super tall skyscrapers, defined as buildings higher than 300m (984ft), has been postponed or is behind schedule.
Among them is Zhongnan Center in the eastern city of Suzhou. Construction of the 729m (2,392ft) skyscraper would make it the second highest in the world if it were ever completed, but building work stalled shortly after construction began in 2015.
If the Wuhan Greenland Center construction does proceed, it still faces an uncertain future. Office buildings in Wuhan reported a 36.2 per cent vacancy rate, a near record high, in the third quarter of this year, according to Jones Lang LaSalle, which expects the ratio to keep rising as anticipated new supply floods in.
Until recently, Greenland had been able to rely on selling expensive residential apartments, which it would develop adjacent to its multi-use mega buildings, to insure itself against any potential losses from empty office space. The strategy, however, is under pressure as sales of luxury homes have fallen off owing to the cooling economy and a crackdown on housing speculation.
“There is a fundamental problem with Greenland’s business model,” said Mr Li. “It doesn’t take into account an economic downturn.”
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