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UK practices set sail for China despite crash fears

Despite a building slowdown, architects say measures put in place in China will ensure its recovery and hail the dawn of a ‘second design boom’ for UK firms, writes Greg Pitcher

Last week further cracks appeared in the world’s second-largest economy. According to official figures, China saw its year-on-year GDP growth fall to a three-year low of 7.6 per cent in the second quarter of 2012.

In December the AJ reported that a 25-per-cent drop in housing transactions had shaken confidence in the country’s mammoth construction market (AJ 01.12.11). Three months later, shares in property developers across China dropped almost 5 per cent in just one day after Premier Wen spoke of the need for curbs on the construction sector.

As Daniel Gillen of China-based MAD architects said: ‘China building isn’t in a slowdown, it’s in a recoil.  It has been stretched to its extreme limits. But before it snapped, measures were put into place to ease the transition to something more stable. It’s as if Beijing is taking a moment to breathe.’

Writing in the Financial Times, Simon Rabinovitch said the concern is that China has made too many bad investments, ‘especially in the property sector, and must pay the price in the form of a sharp economic slowdown’.

To prevent a crash, the mini-slowdown in China’s growth has been caused by the government’s deliberate anti-inflation measures – particularly aimed at housing.

Yet despite the economic warnings, British practices are continuing to seek work in the region. Some are even hailing the dawn of a ‘second design boom’.

A clutch of UK architects have decided it is time to set up offices in China, with both Wilkinson Eyre and Zaha Hadid Architects looking at Hong Kong for new bases.

Simon Yu of Zaha Hadid Architects said: ‘There is still a window for UK practices in China. When I came in 2004-05 we felt we’d got there too late. But nearly a decade later and we are managing to secure projects [such as the Nanjing Youth Olympic Centre pictured] and it seems fairly stable. It might even be a little better than that. It hasn’t dried up at all.’

He added: ‘There was a bit of a wobble [before Christmas] and people were genuinely afraid. China hasn’t experienced a depression yet. But it didn’t take long to settle down.’

BDP chairman David Cash believes the government-led crackdown on the residential sector may have benefited UK practices in the long run.

‘Houses tend to be built by local architects,’ he said. ‘The shift went from housing to office and leisure work. Developers that were using local architects for housing turned to international firms when they diversified as they wanted our knowledge and experience.’

Aedas Asia chief executive David Roberts said the residential slump had led to a consolidation of developers that had also benefited established architects.

‘Something like 35 per cent of developers have been absorbed by others,’ he said. ‘Where the market is contracting, we have expanded our market share.’

The practice doubled its China turnover this year and expects to increase it by almost a third in 2013, Roberts said. It plans to open at least three offices in the country this year. New regions were opening up to UK practices, he added.

‘High-speed rail has made China 40 per cent smaller in terms of travel times,’ Roberts said. ‘Second and third-tier cities are becoming development nodes, while aviation expansion has redefined where development will be in future,’ he continued.

Gordon Affleck, partner of 10 design, agreed: ‘We have seen a definitive slowdown for the last 10 months, but there has been a real pick-up in enquiries over the last two months from second and third-tier cities’.

China_graph

In autumn, the National Congress of the Communist Party is widely expected to see major new personnel enter the Chinese government and kickstart growth. Charlie Sutherland, director at Edinburgh-based Sutherland Hussey Architects, described it as a once-in-a-decade event.

‘The build up has had a negative effect on the market, as clients have been putting everything on hold but, once all the new people are in place, things will start moving,’ he said.

Sutherland said China is still one of the most attractive regions in the world to seek design work.

‘The market is definitely on the turn after the slowdown we have seen. Looking at the other options in the West, I can’t see anywhere other than South America that might rival China.’

Cash said this second boom in Chinese design work could be the last chance UK practices would have to establish themselves in the country.

‘There is a window of opportunity that could close within five years,’ he said. ‘The Chinese are creating a generation that will be able to do it for themselves but at the moment there is a large gap and I think it’s important to take advantage.’

He said BDP may open offices in the north and south of the country to complement its Shanghai base. It will also look to hire more local architects.

‘In three or four years’ time, when the economy is recovering in the UK, our aim is to make the Shanghai office self-sustaining,’ he said. ‘You need to be aware of the speed with which local architects are developing. We need to compete with them on their territory as well as ours.’

Lucy Richardson, director of Bespoke Careers’ Hong Kong office, said: ‘Clients are keen to recruit Mandarin-speaking architects’.

The pessimistic growth figures released last Thursday did not unduly concern the Royal Institution of Chartered Surveyors (RICS). RICS economist Andy Wu said China had at least five years of growing ahead of Europe. He added: ‘This slowdown will probably cause short-term pain because some construction projects may be put on hold. But, given the fact that China’s economy is likely to grow at a rate of 6-8 per cent over the next couple of years, the levels of construction activity in China should hold up.’ 

Alan Dunlop, visiting professor at Robert Gordon University in Aberdeen and an external assessor at Xi’an Jiaotong-Liverpool University, denied China would become another Dubai.

‘Dubai was a myth, a brilliant PR and marketing exercise built on sand. True the Chinese GDP has dropped to 7.6 per cent but this is still an enviable figure by Western standards and a figure the UK would kill for. When the world economy collapsed in 2008, China implemented huge stimulus measures and barely noticed. It will do the same now and all commentators think the figure will rise again in August.’

He added: ‘The situation in the UK is desperate. As far as young architects are concerned, China and India are the places to go to.’ He added that local developers were keen to work with international architects for longer on each job.

At the moment, blueprints are passed to local design institutes at detailed stage by law.

‘Some see the drop in quality created by this system and are looking to get the original architects involved right through to the end,’ Dunlop said. ‘Change is coming.’

By collaborating with local firms, Aedas’ Roberts said UK practices are well placed to take advantage of the next wave of work.

‘UK firms still have a very strong brand in China,’ he said. ‘They are seen as innovative, creative and with good sustainability credentials. But you have to understand the client base, the contracts and what you need to deliver. It is different to the UK.’

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