Clean, green and glassy, the Roppongi Hills building epitomizes a new Tokyo style so much that Hollywood regularly uses it as a backdrop – most effectively in Lost in Translation. In the Bill Murray film, as in reality, executives and filmmakers lounge in the lobby of the five-star Hyatt while chic Japanese shop for cosmetics and couture below floors of well-appointed offices, all in an architecturally pleasing building.
The setting sounds like a snug fit for Shanghai, where surging economic growth is lifting demand and rents for grade-A office space.
After successfully replicating the Hills mixed-use model around Japan, Mori Building Group, Japan's largest privately-owned developer, is bringing it to Shanghai, China's most glamorous city.
The World Financial Center (WFC) in Shanghai's Pudong financial district was designed by New York firm Kohn Pedersen Fox and built by a joint venture between China Construction and Engineering and Shanghai Construction Group. At 101 stories, or half a kilometer, tall, it will be the mainland's tallest building when it opens in 2008.
Return to the fray
Japanese developers have been quiet in China since Mori opened the Senmao Tower (now the HSBC Tower) in Shanghai in 1998, particularly compared to their Hong Kong counterparts.
But there's been a new surge of design-driven Japanese properties recently.
Rockefeller, a real estate subsidiary of conglomerate Mitsubishi, is working on a 94,000 square-meter mixed-use complex of apartments, shops and a boutique hotel in Shanghai's new Waitanyuan area, just north of the Bund. Completion is scheduled for 2009 though reports of forced evictions of locals have sullied the project's image.
Mitsui, Japan's largest developer, opened the Xi'an Garden Hotel in Xi'an, which is small beans next to its 461 Fifth Avenue Building in New York.
Lately the company has been exploring opportunities in the high-end Chinese residential market, a spokesperson said. The company will use its know-how in Japan's design-conscious residential market to "create new business opportunities".
China is hungry for Japanese standards of style and hospitality, says Frank Zhu, head of marketing at the Japanese-run Okura Garden Hotel Shanghai.
Managed by high-end Japanese hotel brand Okura Hotels and Resorts, the hotel's fusion of "Japanese sensibility, tradition, and culture with modern functionality" has succeeded in Shanghai, Zhu said, because it provides exacting Japanese-style service and a range of dining options.
Mori will use Japan's reputation in high-design and top service to exploit Shanghai's booming economy. Shanghai's GDP grew by 9% in 2006 while average grade-A office rents reached US$0.99 per square meters per day, according to property consultancy Jones Lang LaSalle. In Pudong, grade-A office rents increased 23.2% to reach US$1.06 per square meter per day.
Meanwhile, office vacancy rates were low, at 2.63%. Lack of new office supply in 2007 will continue to drive rents up, says Kenny Ho, head of research at Jones Lang LaSalle in Shanghai.
The WFC is Mori's third venture in China. In addition to Shanghai's Senmao Tower, it opened a Dalian building in 1996 – but both are far less ambitious. The WFC will have a six-star Hyatt hotel and the world's highest observation platform. Its 62 floors of office space will be at the top end of the market. Twelve to 16 floors already have prospective tenants, says Robert Hindman, the WFC's head of marketing.
Hindman won't diclose rents, only saying that they will be competitive.
"Look to local grade-A buildings and you'll have a good idea of what we'll charge," he said. "It's not like Hong Kong where rents are astronomical."
Leases will be signed in the next few months but several banks have already agreed to rent space. Most tenants will be foreign multinationals, although local companies are also expected.
"One and a half years ago, tenants would have been all [foreign] multinationals. But we will have some Chinese tenants," Hindman added.
The WFC's foundation stone was laid on August 1997, but the Asian financial crisis halted construction. The US$850 million project was rescued after a consortium of 36 international and Japanese investors was formed. Design changes and post-September 11 safety features added US$200 million to the bill since construction resumed in early 2003.
When it is finished in 2008, it will be the first of Mori's mixed-use projects outside Japan since it started a series of Hills-branded buildings in major Japanese cities in 1986.
Haunted by history
Japan's difficult history with its giant neighbor has haunted the WFC. What caused the most fuss was a circular hole at the top of the building that was supposed to represent "heaven" and serve as a way to reduce wind load on the building. But China linked it to Japan's imperial symbol of a rising sun. In mid-October 2005, Mori caved, and "heaven" was changed to a rectangular opening.
Even the building's name has been contentious. Mori informally called the development Shanghai Hills, but city planners prefer the grander sounding World Financial Center. In December, Mori announced the building would be known as Shanghai Hills World Financial Center.
Given historical Sino-Japanese grievances, it's understandable that Mori shies away from the J-word. "It really is a global project," said Hindman, an American.
For all the talk of Japanese aesthetics, architecture has not turned out to be the WFC's main selling point. According to Hindman, companies prioritize back-up power and staff comforts.
"When competition for staff and retention are crucial, affordable lunches are important," he said.
The building will have nine generators to keep the lights on in the event of a power outage, a backup system said to be equaled by only one other construction in the city.
Mori will also implement Japanese property management standards in the WFC, brining in 40, mainly Japanese, managers, from its headquarters.
Mori's new brand of Japanese real estate seems like an irresistible match for Shanghai's global aspirations, despite the redesigns and ruffled feathers. As Hindman puts it: "We are going an extra step in mixed-use. What we're building is a city within a city."