Macau turns to real estate as pandemic jeopardises its lucrative gambling industry

Land for commercial use will increase to 1.47 square km, or 4% of the total land area.

Macau experienced its version of the “Roaring Twenties” since re-uniting with Mainland China two decades ago. According to JLL, the city turned into a world-class gambling Mecca after the local gaming license was liberalised. This year, however, the unprecedented Covid-19 pandemic has dealt a serious blow to the gaming industry, prompting the Macau SAR to seek new paths for economic diversification.

In September 2020, The Draft of Urban Master Plan for Macau SAR 2020-2040 (“the Plan”) was published. This is the first blueprint of Macau’s urban planning. According to estimates, Macau’s total land area will expand to 36.8 square km, and the city will accommodate 808,000 residents by 2040. The population density will rise to 21,957 people per square km, about 6.3% denser compared to 2019.

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With the increasing population, housing will undoubtedly be one of the most challenging issues for Macau. About 32.3% of the total residential stock in Macau, or some 75,655 residential units, are more than 30 years old, as of 2019. However, under the existing redevelopment policy, it is mandatory to obtain 100% consent from respective households, which makes urban renewal works extremely difficult to proceed.

Moreover, urban renewal work is stuck as Macau lacks concrete urban planning for redevelopment and compensation schemes. The Urban Master Plan is crucial for setting future land uses and development parameters. It proposes to divide Macau into 8 zones by land use and 18 planning districts, to facilitate the Detailed Zoning Plans and provide development parameters in the future.

As Macau is keen to diversify its economy to maintain a more balanced and sustainable industrial structure, adding more commercial elements to the city becomes essential to fulfil this goal. According to the Plan, land for commercial use will increase to 1.47 square km and account for 4.0% of the total land area (as compared to the current 0.6%). The government now aims to add more commercial areas clustered around residential zones, to reduce the commuting time, which would help ease traffic congestion. Venesclau Morais, New Town Zone B, Taipa and Cotai are some of the areas that could be turned into commercial use.

Another focus of the Plan is Industrial land. In the 1970s, textiles, garments and other light industries were the mainstays of Macau’s economy. However, manufacturing gradually relocated to mainland China while tourism and gaming industries started to dominate the economy. This transformation left many high-rise strata title industrial buildings in central Macau obsolete.

As those areas will be changed for either residential or commercial use, industrial activities are being encouraged to move to industrial zones, such as Pac On and the industrial parks at Ilha Verde and Coloane. The challenge is that the new industrial zones might not provide adequate spaces to accommodate all the industrial occupiers unless the plot ratio of these zones is relaxed. In addition, the government may need to incentivise industrial occupiers in the relocation.

Macau is slated to renew the gaming licenses in 2022. Without a doubt, the gaming industry will remain the mainstay of the city. Yet, the long-awaited Urban Master Plan and its detailed guidelines will facilitate economic diversification. When implemented in earnest, this should reduce the economy’s reliance on a single industry. The emphasis on commercial land use will also create more jobs and opportunities for real estate professionals.