After 14 years of struggle, controversy, and redesigns, Mori Building's Shanghai World Financial Center is China's tallest skyscraper
On Aug. 30, Japanese visionary real estate developer Minoru Mori will unveil his latest project: the 101-story Shanghai World Financial Center (SWFC). The 1,614-foot tall, bottle opener-shaped skyscraper, which towers over Shanghai's other skyscrapers in the Pudong financial district, holds the title of tallest building in China.
For Mori, SWFC's ribbon cutting will be a moment of triumph and vindication. He first started work on what was planned to be the world's tallest building in 1994, when there were more farmers than bankers living in Pudong district. The project was put on hold, first by the Asian financial crisis, then by September 11, then SARS. Some of the original Japanese investors got cold feet and bailed out. Mori bought out their equity, raising his stake in SWFC to 80% from 30%. In the meantime, Taipei and Dubai have erected taller skyscrapers.
Each crisis forced Mori back to the drawing board. Building plans were revised so the SWFC's roof would be taller than the Taipei 101. (Taiwan still has the taller building when its spire is included.) And the revisions didn't stop after construction started. During the anti-Japanese protests in 2005, architect Kohn Petersen Fox's original design—a circle with a Ferris wheel inside the top of the building—was criticized by Chinese nationalists for placing a Japanese flag in Shanghai's skyline. Mori changed the circle to a rectangle, whose top houses the world's highest observation deck.
"It never crossed my mind to abandon this project," says Mori, president and chief executive officer of Mori Building. "During the time the construction had been suspended, we upgraded the design and specifications of this building to meet expectations in size and quality as a world-class landmark in Shanghai. What you see today is the final achievement that overcame all these obstacles and turned them into opportunities."
Mori made his name developing Tokyo's famed Roppongi Hills project (BusinessWeek, 11/4/02), bringing office towers, luxury apartments, and museums into one complex so salarymen wouldn't have to spend hours commuting home to the suburbs every evening. The SWFC marks the first time he is carrying this "vertical garden city" concept outside of Tokyo. The SWFC will house shops and restaurants from its basement to the third floor, commercial office space for the next 70 floors, and an upscale Park Hyatt hotel from the 79th to 93rd floors, making it the loftiest hotel in the world.
And it looks like Mori's bet on Shanghai has paid off. While sky-high prices in Shanghai's residential property market have kept potential buyers and luxury home real estate developers on the sidelines (BusinessWeek, 10/10/05), the supply of high-quality, Grade A office buildings has exploded to cater to banks, brokerages, and law firms expanding in Shanghai. SWFC already has a 45% occupancy rate, which includes Morgan Stanley (MS), BNP Paribas (BNPP.PA), and Sumitomo Mitsui Banking as tenants, despite charging a pricey $3 per square meter for rent. Hiroo Mori, chairman of SWFC and Mori's son-in-law, expects to have a 90% occupancy rate one year from now, putting Mori Building on track to recoup its $1.1 billion investment in SWFC in 12 years. "We are confident that we will attract further office demand," he says.
However, it may be a while before Mori starts another project outside of Japan. He has been approached by investors to bring Roppongi Hills-style projects to Singapore, Bangkok, and Seoul. Mori says that he is considering taking on these projects, but wants to see how the situation in the world economy plays out before making a decision. "We're waiting for the dust to settle. In Tokyo, we're pursuing whatever we decided to do. For the rest, we are waiting for a while," he says.
The problem is that America's subprime crisis has started to spread to Tokyo. During the real estate bubble, a number of real estate firms started popping up in Japan to help privately held investment funds find properties to invest in. But when the investment funds went belly up from the subprime mess, credit stopped flowing to these Japanese real estate firms. A string of Japanese real estate firms have gone bankrupt, including Urban Corp. earlier this month and Sohken Homes this week.
Mori is taking this opportunity to buy up companies in distress, albeit in a planned, systematic manner. He is currently developing seven large projects in Tokyo, including a second Roppongi Hills. It took him 14 years to acquire the 28 acres needed to build the first Roppongi Hills. Now, he is buying distressed properties, mainly in the areas he is planning to develop—or in good locations that can be traded for properties in areas he wants to develop. Mori Building plans to purchase $3.3 billion in property assets in this fiscal year, which ends in March 2009, and an equal amount next fiscal year. He notes: "So in a way, these problems are leaving us good problems to speed up larger projects, because people who were bidding against us even until a few months ago are now coming to ask us to buy these properties."