The decision to host the 2008 Olympic Games in Beijing will have a profound impact on the city. In the long-term, it will boost trade and further open up the Chinese economy. The more immediate impact will be seen in urban and Olympic-related infrastructure developments, along with massive investment in environmental improvements.
Construction of transport-related infrastructure, worth US$3.7bn, will commence rapidly. There are plans for a third runway and an extra terminal at Beijing's international airport. An additional 228km of roads will be built, along with five new metro lines. These will provide obvious benefits for the tourism sector and the local community.
There will be 37 venues for the Olympic events, 22 of which still require construction. The plan is to complete these facilities by 2006, which means building work will need to start within a few years. The main Olympic precinct will be the Olympic Green to the north of the city centre. This will require the construction of an 80-hectare Olympic Village, which is planned to start by 2005 and which will have significant long term implications for the residential market.
Beijing will experience a significant increase in telecoms infrastructure. At present, the city does not have the required facilities to support the Games. However, the government has pledged to have the facilities in place in time. This will have far-reaching implications for the commercial sector.
A massive environmental programme is likely to be one of the biggest legacies of the Olympics. The ?Beijing sustainable development plan' committed US$12.2bn between 1998 and 2007 to some 20 environmental programmes and anti-pollution measures. The government has so far spent less than 30 percent of this budget, so there is significant investment yet to be made.
The key to the success of hosting major events such as the Olympics is the ability of the city to capitalise on the images and perceptions created during the event itself and to continue delivering on the dream long after the circus has left town. How well can the city take advantage of the transient world focus upon it? How indelible are the images?
How can they best be sustained? Some specific recommendations follow:
Boost the tourism/convention industry
The long-term payback of hosting the Olympics for a host city's tourism and convention industries is potentially profound. The Sydney Olympics was used to transform the country into a living postcard and was widely recognised as the biggest marketing event in the nation's history. The Australian Tourist Commission estimated that the Games generated US$2.4bn-worth of publicity for Sydney and Australia between 1997 and 2000, with a total of 18,000 journalists attending the Games themselves.
The Olympics are also a strong growth driver for a city's convention market. They not only provide a legacy of world-class sporting, tourism, convention and general infrastructure, but also demonstrate the city's ability to host major world-class events, a massive bonus for the convention market.
Invest in long term infrastructure
Most recent host cities have learnt from the costly mistakes of earlier hosts by seeking to minimise investment in temporary facilities for the Games themselves, while maximising investment in lasting projects. A major long-term impact of hosting the Olympics is the opportunity it provides to influence the pat-tern of urban development.
Improve the local environment
Beijing already has an ambitious programme that aims to significantly improve the quality of the environment. The integration of environmental concepts into its Olympic infrastructure is also recommended. Sydney placed a strong emphasis on the environment.
Its Olympic infrastructure included the Olympic Village, the world's largest solar-powered settlement. Many of the stadiums produced their own power, with excess power being fed directly into the state electricity grid. International benchmarks were also established with regard to waste reduction, water re-use and the selection of recyclable materials within Olympic facilities. The other major environmental selling point was the high level of public transport usage that was achieved, with virtually all trips to the main Olympic venues being serviced by public transport.
Create a more open economy
Despite providing a major boost to the local economy, the Olympics will have a relatively insignificant impact on the national economy. In three of the past four Olympic host cities, the net contribution from the Games to GDP was in the range of 1-3 percent. However, the indirect impact in terms of boosting trade and further opening up the Chinese economy over the longer term is tremendous.
The Olympics serve as a major city pro-notional campaign, but there is unlikely to be an increase in office development unless here is a sound business case for companies to locate in Beijing. There are also issues of infrastructure, business environment and skilled labour to consider.
However, the Olympics will certainly serve to open the economy to the international market and could boost trade significantly. Increased international trade will generate additional demand for office space in Beijing after the Games. The extent and timing of this demand is difficult to predict and has more to do with the speed at which China continues to liberalise its markets than with he Olympics themselves. In this regard, China's probable accession to the WTO later his year is likely to be of more long-lasting significance than the Olympics itself.
Luxury hotel sector
The Games are likely to result in an increase in international-standard hotels and a refurbishment of existing properties. The Beijing Olympic Committee suggests there are currently 85,000 rooms and this will grow to 30,000 by 2008. This is a total growth of 53 Percent, or a compound average annual growth of 6.3 percent. We estimate there are currently 50 four-to-five-star properties corn-rising 23,827 rooms.
If Sydney is anything to go by, Beijing All enjoy a growth in quality room supply. between 1994 and 1997, total room supply in the city increased by a compound average rate of 3.6 percent a year. However, the real growth was from 1997 onwards. Projects were timed within an ?Olympic window' where all rooms were opened prior to the Olympic Games.
The increase in exposure for the city (and country) will also open up the region inter-nationally. Depending on how effectively Beijing leverages the Games, they could have long-lasting and far-reaching implications for the city's tourism and hotel sector.
The residential sector will also experience a longer-term impact, mainly as the result of the creation of a new residential precinct in the Olympic Green area to the north of the city core. The conversion of an Olympic village into a new suburb is a theme consistent with many other Olympic Games. Beijing's commitment to improve the environmental quality of the city, particularly through the creation of the 760-hectare Forest Park, will likely result in the same positive benefits experienced by Sydney.
The office sector will benefit more indirectly from the increase in commercial activity as a result of Olympic-induced spending on infrastructure developments and the opening of the economy to overseas corporates. More directly, it should benefit from the investment in telecommunications. Atlanta, for example, laid down more than 725,000km of fibre-optic cabling and has since attracted several technology-based companies.
The retail sector will enjoy only a short-term boost and there are unlikely to be any major repercussions on this sector.
Lessons of the past
Beijing can learn from the mistakes of past host cities. It should:
-ensure facilities are ready on time and not over-sell potential success – Atlanta's failure to complete its entire transport infrastructure on schedule resulted in negative publicity.
-do not create unrealistic expectations, a problem for Atlanta and to a lesser extent Barcelona, where some expectations proved overly optimistic.
-be aware of short-term overcrowding and pressures on both physical and financial systems and develop contingency strategies. Associated problems include pressure on transport systems, disruption to local businesses and inflationary pressures.
-develop strategies to minimise the diversion of activity and resources from other areas. This is difficult to quantify, but other projects and other locations can be impacted negatively by the focusing of resources and budgets on Olympic-related projects.
-planning authorities need to be aware of the potential over-development of real estate markets. Some cities, particularly Barcelona, suffered badly from this problem.
This article was written by Jones Lang LaSalle, a global real estate consultancy services company with China offices in Hong Kong, Beijing and Shanghai. For further information, contact Robert Walker, MD Beijing office on +86 (10) 6588 1300 or by email at robert. walker@ ap joneslanglasalle. com