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BEIJING-GlobeSt.com has gotten an exclusive sneak peak look at Jones Lang LaSalle’s China40: The Rising Urban Stars report. In it, the Chicago-based company claims that China’s secondary and tertiary markets will begin to play a greater and greater role in the country’s real estate market. As a result, the property market here could quadruple in size by 2020.

“China’s Tier II and Tier III cities are dynamic centers of economic development and continued growth,” says Michael Klibaner, head of research Shanghai. “Massive infrastructure investment makes these markets increasingly accessible at a time when interest in China has shifted from being export oriented towards a focus on the domestic market.”

JLL analyzed the top 40 Tier II and Tier III cities that will be on the radar screen for investors in the years to come. From there executives identified the top three cities per real estate type. For office, Tianjon, Chongqing and Nanjong made the list; in retail Changsha, Wuhan and Wenzhou; and in Logistics Chengdu, Qingdao and Zhengzhou.

“The future evolution of China’s cities and their real estate markets will be driven by a rich combination of factors that are strongly influenced by government policy,” the report states. These policies focus on urbanization, with plans in place to see the city population explode to 850 million people by 2020. “The government’s ideal end vision of the urbanization process is a country wide network of environmentally sensitive cities each with their own unique competitive advantages and strong trading connections.”

China’s grade A office supply is roughly the size of Washington, DC’s entire supply, averaging 39.4 million square feet by the end of the year. But by 2011, that supply is expected to expand to 68.9 million square feet, with half the increase due to development projects in the Tier II and Tier III cities. The demand in these cities is being created by real estate advisors, insurance services and the banking sector.

JLL lists Dalian, Chengdu, Hangzhou, Shenyang, Wuhan, Tianjin, Nanjing and Chongqing as having the greatest potential to becomes robust office hubs.

“We are confident that more business park hotspots will emerge as experienced developers and investors penetrate further into China’s Tier II and Tier III cities,” says Tammy Tank, head of business parks in China. “Although investors are currently adopting a cautious approach due to the limited amount of international standard space on the market and the opaque business environment, they are universally confident about growth prospects over the next decade.”

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