Mori's Skyscraper Opens in China - WSJ.com

Mori's Skyscraper Opens in China - WSJ.com


Mori's Skyscraper Opens in China
Building Represents
Developer's Big Bet
In Crowded Market
By JAMES T. AREDDY
September 2, 2008; Page B2

SHANGHAI -- In a big bet on China's post-Olympics economy, Japanese developer Minoru Mori opened the country's tallest skyscraper in a challenging environment.

Members of the public were allowed starting Saturday to enter the observatory near the top of the 492-meter, 101-floor Shanghai World Financial Center, following the opening of some other parts of the tower in recent days.


Reuters
The Shanghai World Financial Centre is on track to reach 90% occupancy within a year, according to its developer and biggest shareholder.
Mr. Mori, whose family-owned company Mori Building Co. owns 70% of the $1.13 billion project, now faces a difficult environment to profit on one of the world's tallest buildings.

In an interview Friday, the 74-year-old developer said he remains confident the building will be 90% full within a year, despite a global credit crunch that is starting to affect China's economy, too. But he also acknowledged that some of the Wall Street firms he was counting on to occupy his tower have scaled back ambitions, in particular Morgan Stanley and Lehman Brothers Holdings Inc.


Some financial executives have told him that "the liberalization of the financial markets [in China] were not enough to have a full business line here," Mr. Mori said.

A spokesman for Morgan Stanley, which through an investment fund owns about 9% of the Shanghai World Financial Center project, declined to comment. Lehman said in a statement: "Given current market conditions and future supply coming onto market, we do not have a pressing need to make commitment at this stage and are evaluating different options available."

One of Tokyo's most prominent developers, Mr. Mori moved more quickly in the early 1990s than almost anyone to capitalize on China's plans to make Shanghai into a financial center. The 14 years he spent on the Shanghai World Financial Center was almost as long as the 17 years required to get his flagship Tokyo development, Roppongi Hills, opened in 2003.

The project was delayed by everything from a regional financial crisis in the late 1990s to strange rumors in China that a circular space planned for the building's peak was a ploy by Mr. Mori to embed the Japanese "rising sun" in Shanghai's skyline.

Now, the building is opening its doors into a crowded market, months behind schedule and with 26 office tenants for almost 70 floors of space. But Mr. Mori shows no concern.

"My past experience shows me that if you have the strength to remain when others give up, opportunity arises," Mr. Mori said. "There is always a cycle." Unexpected new tenants, like Middle Eastern investment funds, will help fill up space, he added.

Mr. Mori isn't the only developer putting his mark on Shanghai's Pudong financial district, notoriously empty a decade ago but now one of the city's priciest areas. About 300 floors of office-building space are nearing completion within a few minutes' walk of Mr. Mori's complex, not including an even taller tower slated to open next door in 2014.

The World Financial Center, designed by New York-based architects Kohn Pedersen Fox Associates, is considered the world's second-tallest finished building, some 17 meters short of Taiwan's Taipei 101, according to a database maintained by Emporis Corp. A building under construction in Dubai will be even taller -- its height has already passed 630 meters.

The Shanghai building has a glass exterior that appears to twist as it narrows toward a flattened wedge at the top. Mr. Mori describes the boxy opening at the top -- which replaced the previously planned circle -- as "like a credit card, which is a symbol of financial development."

Mori officials say they will maintain premium lease rates but concede that their posted price of $3 per day per square meter of net space applies only to a fraction of the tower. "These buildings don't command a premium rental when they first come onto the market," said Tim O'Connor, senior director at CB Richard Ellis Property Consultants Ltd.

Atop Mr. Mori's building, a tunnel with glass floors and walls offers a view of Shanghai that is as dizzying as it is dazzling. A skyline of some of the world's tallest towers unfolds below, and people on the streets appear as imperceptible specks. The lobby of its Park Hyatt hotel stands on floor 87.

The 91 elevators that cut through the building, mostly its middle, can make for a confusing walk around office floors, while ventilation-system placement necessitates smallish windows.

"It probably is the highest-quality building in Shanghai. But the bang for the buck I'm not sure is worth it," said Theodore Jusin Novak, a senior adviser at property adviser Debenham Tie Leung in Shanghai. "It's not leasing as well as expected or hoped."

"It's a landmark building and no one will miss it," said Roy Chan, a partner at DLA Piper, which leased about two-thirds of floor 36.

Write to James T. Areddy at james.areddy@wsj.com