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Now Coming out of Chinese Factories: Cities in a Box

Amid Massive Urban Growth, Lower-Tier Areas Are Buying, Building and Marketing Model Towns

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The city that started it all: Shanghai's Xintiandi, filled with shops and outdoor cafes, inspired many copy cats.
The city that started it all: Shanghai's Xintiandi, filled with shops and outdoor cafes, inspired many copy cats.

Perhaps it was inevitable in a country that is building cities at an unprecedented pace that the city itself would become a brand, and that Western architects would quietly become marketers.

Last summer's 2010 World Expo in Shanghai was the largest marketing campaign in history, lasting six months, drawing 73 million visitors, and spending $58 billion to demolish and rebuild large swaths of the city, all to sell the message "Better City, Better Life." The Chinese had already bought it.

Between 1990 and 2005, China's urban population more than doubled, from 254 million to 572 million -- an increase equal to the total population of the United States. Over the same stretch, China added a staggering 600 million members to its emerging middle class -- nearly all of them in cities. China expects to add another 350 million urban residents by 2025, this time in hundreds of small cities poised to explode in size.

While peasants waited hours to tour faux Roman ruins and other sights, China's mayors skipped the Expo to tour the city's most fashionable neighborhood. Nestled in the winding streets of the French Concession, Xintiandi ("New Heaven and Earth") is Shanghai's answer to Manhattan's SoHo -- an upscale shopping district packed with outdoor cafes and pedestrians. But Xintiandi is largely the creation of one man, billionaire developer Vincent Lo.

Mr. Lo inherited the site in the mid-1990s, after city officials had proposed knocking the entire area down. "They'd tried many times to rehabilitate the older building stock, but the economics had never worked," said John Kriken, Xintiandi's master planner and a consulting partner at the architecture firm of Skidmore, Owings and Merrill. The answer was to transform a borderline slum into an urban theme park covering hundreds of acres, complete with its own artificial lake and room for future high rises. Land prices have since quintupled.

"When we started, we thought no one would ever eat outside in Shanghai," said Mr. Kriken. But Xintiandi was a big hit upon completion in 2003, inspiring copycats around the city. Today, Mr. Lo's Shui On Group is one of the most sought-after developers in China, and its most popular product is clones of Xintiandi. "Every government official in charge of redevelopment is trying to take advantage of their city's heritage," added Mr. Kriken. But with so much money and entire downtowns at stake, they also want a model that 's proven. As a result, Lo is busily building sequels in the second-tier cities of Hangzhou ("Xihu Tiandi"), Wuhan ("Wuhan Tiandi"), and Chongqing ("Chongqing Tiandi"), among others.

New luxury: Plaza 66, top, boasts the highest concentration of luxury brands of any mall in China. Songdo golf course and complex.
New luxury: Plaza 66, top, boasts the highest concentration of luxury brands of any mall in China. Songdo golf course and complex.

Rome may not have been built in a day, but China is building the equivalent every two weeks, having added as much new housing last year as the entirety of Spain's, according to the Economist Intelligence Unit. One reason is demographics, but another is sheer greed. Land prices doubled across China in the wake of the global financial crisis, as billions of dollars in stimulus funds sloshed into real-estate speculation. Entire "ghost cities" of sold-out apartments have appeared as storehouses of wealth.

Alarmed officials have tried to crack down on runaway lending, but their efforts have been hampered by local mayors and party secretaries. Municipal governments typically raise anywhere between 15% to 25% of their annual budgets from land sales to private developers, a powerful incentive to keep building. One way to skirt the central government's disapproval is to promote prestige projects by proven developers -- leading some of them to become brands unto themselves.

Xintiandi and its sequels are one. Plaza 66, a Shanghai luxury mall-and-office tower complex developed by Hong Kong's Hang Lung Properties and its billionaire chairman Ronnie Chan, is another. Boasting the highest concentration of luxury brands of any mall in China, Plaza 66 posted a 31% gross margin last year. This spawned Palace 66 in Shenyang, "herald[ing] an era where we will open one or more new world-class commercial complexes each year," Mr. Chan promised in his annual letter to shareholders. He wasn't exaggerating. Next up is Parc 66 in Jinan, followed by Riverside 66 (Tianjin), Olympia 66 (Dalian), Center 66 (Wuxi), and Forum 66 (Shenyang again).

Rather than one-offs, each of the 66s is roughly similar in size, cost and complexity, enabling the developer and his architects to lower the risk while speeding the time to market.

The developer wants the economies of scale; the architects want steady work; and mayors want a landmark without the risk of trying something new. "They're relying on these brands. They don't have time, they don't have expertise, and the risks of failure of the new and unproven outweigh a uniqueness you may enjoy," said Mr. von Klemperer.

Leave it to an American developer to take this development strategy to its extreme. Stan Gale, chairman of New York-based Gale International, has approached officials in Chongqing and Changsha about building what he calls a "city in a box" -- a dense urban district of more than 100 million square feet with state-of -the-art energy-saving technologies. His template is Songdo International Business District, a $35 billion city being built from scratch on a man-made island off the coast of South Korea. At completion (currently scheduled for 2015), it will be roughly the size of downtown Boston, with 65,000 residents.

Commissioned in 2001 at the behest of the Korean government, Songdo was designed as a haven for foreign multinationals and their expatriate employees. As such, Songdo itself is a constellation of blue-chip brands, including a Jack Nicklaus-designed golf course, plans for a mall by Taubman properties, and a Central Park and street grid modeled on Manhattan's. It has subsequently been rebranded as the experimental prototype community of tomorrow.

Selling a city isn't dissimilar to selling any high-concept product: "First, you have to dissect your partner group: who are we speaking to and what do we need to say to them?" said Tom Murcott, Songdo's chief marketing officer and a former Grey Advertising executive. In this case, the constituents are a skeptical Korean government, Seoul residents tired of living in soulless apartment blocks, and Chinese mayors on the prowl for prestige projects.

On Songdo's opening day in 2009, Mr. Gale announced his intentions to build as many as 20 sequels. The first was slated for Changsha, another of China's tier-two cities, but Gale couldn't come to terms on the deal. His local partners went ahead anyway, based on the master plan KPF had prepared.

"We delivered in six months what took seven years in Songdo," said Mr. Murcott. "We know it can be done, and we know it's replicable."

ABOUT THE AUTHOR
Greg Lindsay is a journalist and, with John D. Kasarda, co-author of "Aerotropolis: The Way We'll Live Next."
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