A few years ago, the trend of bringing industry into urban areas was all the rage, and many places quickly followed suit.

Factory buildings were constructed taller and taller, with a focus on "high floor area ratio."

As the craze subsided, the practical challenges posed by this model gradually came to light.

Everyone began to adjust their strategies, and Zhuhai took particularly bold action by decisively scrapping the “Industry 5.0 New Space” initiative.

Looking at the present, how should floor area ratio be assessed when constructing industrial buildings?

Is there still a viable path forward for existing high-floor-area-ratio factories?

Drawing on field research from multiple regions, the author offers a dialectical analysis of these issues.

01 Why the Fixation on Floor Area Ratio

The first scenario is where land is indeed in short supply, though this is not an absolute rule.

It must be acknowledged that in some areas, land is scarce, and the FAR continues to rise.

We observe that in downtown Suzhou, the floor area ratio is generally around 2.5.

In fact, for some industrial real estate projects intended for the construction and sale of factory buildings, a floor area ratio of 3.6 may even be required.

In Shenzhen, which was the first to push for higher floor area ratios, the situation is complex: on the one hand, the region has many mountains and hills, resulting in fewer flat plots suitable for factory construction;

on the other hand, the local industrial development—which can accommodate high-rise enterprises—consists mostly of electronics and information technology assembly projects.

Combined, this makes the shift to multi-story industrial facilities much more reasonable.

However, the shortage of land is primarily concentrated within urban areas or in regions with dense industrial clusters.

In fact, whether in Shenzhen or the Jiangsu-Zhejiang-Shanghai region, land in the suburbs is relatively abundant.

In areas like Fengxian, Songjiang, and Lingang in Shanghai, there is plenty of land and vacant factory space waiting to be utilized.

In areas where space is tight, only 200 mu of usable land remains per year; it may not be possible to free up much more land in the future, yet there is a desire to upgrade and modernize industries.

In such cases, the focus shifts to maximizing land use—that is, the concept of “intensive utilization” with high floor area ratios.

The second scenario involves an incomplete assessment of the situation, leading to an attempt to replicate Shenzhen’s experience.

In some places, assessments of the situation focus only on the positive aspects while overlooking potential risks.

After visiting Shenzhen and observing that local enterprises operate in high-rise buildings, project quality is high, and most are high-tech firms, they decide to replicate this model by implementing “industry in high-rises.”

They even propose making facility construction a core task and require subordinate districts and counties to push it forward.

Alternatively, they remain stuck in past experiences, assuming that as the number of enterprises grows, so will the demand for factory space.

Consequently, they actively plan factory construction to secure market share early on.

We observed that during the boom in the electronics and information technology sector, many regions—including Jiangxi, Hunan, and Yancheng in Jiangsu—constructed 5- to 8-story factory buildings to assemble electronic equipment and devices.

In some mature industrial parks, enterprises did indeed thrive; in others, however, parks followed the trend by constructing multi-story factory buildings and luring enterprises with incentives such as rent-free periods. Once the rent-free periods ended, enterprises began to leave in droves.

With factories but no industry, the parks fell into silence. This is the aftereffect of “moving industry into high-rises.”

The third scenario involves local governments prioritizing performance metrics, relying on factory construction to boost investment targets.

A low floor area ratio is “unprofitable.”

A high floor area ratio implies higher investment intensity and denser building volumes.

Where previously only 1,000 to 2,000 square meters of factory space could be built, now 3,000 to 4,000 square meters can be constructed.

For the same floor area, this results in two to three times—or even more—the original volume.

The associated metrics for bond issuance and financing also increase accordingly.

Simply put, local governments are promoting the vertical integration of industry because they believe that once industrial parks are established, they can resolve a series of issues such as facility availability, investment, and financing.

The influx of various forms of investment—including bond issuance, financing, corporate investment, and state-owned enterprise investment—contributes to impressive performance metrics in evaluations and aligns with local annual investment targets.

Take bond issuance, for example; it is largely a practice of borrowing new funds to repay old debts.

Essentially, this involves using future time and funds to resolve current development challenges, shifting the debt burden onto subsequent management or asset scale.

To illustrate: suppose a certain industrial park secures 500 million yuan in financing. Although factory construction is carried out in phases, the funds are disbursed in a single lump sum.

These funds can be flexibly used for immediate expenditures such as payroll.

What was originally intended as an industrial facility has become a short-term financing tool.

02 It’s Time to Re-examine the Trend of Industrial Facilities Moving into High-Rise Buildings

The prosperity of the industrial boom acted like a filter, masking many issues caused by high floor area ratios.

Once the boom in industrial vertical development subsided, the problem of persistently high vacancy rates became apparent.

Currently, the central government is controlling local government debt and strictly regulating the excessive construction of multi-story industrial buildings.

An increasing number of localities are realizing that high floor area ratios are not necessarily a good thing.

In this context, the proactive reduction of floor area ratios in certain areas of Shanghai represents a rational response to the industrial park market.

High floor area ratios are often what local governments want, but not what businesses need.

When selecting a location, enterprises consider several factors: First, relative independence—for example, prioritizing single-story factories; if possible, avoiding partitioning.

Second, industrial clustering—the presence of similar businesses in the vicinity and a sense that the local government prioritizes the industry.

Focusing on the practicalities of investment promotion, what should be done with existing multi-story factory buildings?

The specifications and parameters of these facilities are fixed and cannot be altered.

The challenge lies in the absorption of upper floors, which can be addressed through targeted matching and floor-by-floor investment promotion.

On one hand, assess which industries the facility is suitable for and target specific enterprises accordingly.

The first floor, as a prime location, should prioritize attracting high-end projects with high investment intensity, advanced technology, and alignment with the local dominant industries to maximize returns;

For upper floors such as the second and third levels, investment criteria should be moderately relaxed to attract projects related to local industries or non-traditional manufacturing sectors like apparel and textiles, or furniture processing.

Such enterprises often face difficulties in securing new factory space or land.

If they value the local area’s established industrial foundation and supporting infrastructure, they are more likely to be willing to occupy upper floors, which can serve as a key strategy for filling these spaces.

On the other hand, consider integrating office and R&D functions, but ensure this aligns with the actual needs of the enterprise.

Currently, most enterprises have limited R&D needs and are more inclined toward efficient space utilization and cost reduction.

For example, some companies simply partition off a few dozen square meters within their production workshops to serve as R&D offices, while the remaining space is still used for production.

If planning to build multi-story factory buildings, it is necessary to adapt to local conditions.

Identify which industries to target, and determine which local and neighboring industries are on the rise and show promising growth trends.

Once these industries are clearly identified, determine what type of facilities they require.

When planning the number of floors, the design must closely align with the characteristics of the industries.

For projects focused on manufacturing, three stories are generally most suitable; for cleanroom facilities, the structure can be extended to four stories.

After all, with multi-story industrial buildings, the higher the floors, the harder they are to lease.

On the one hand, high-rise industrial buildings cannot address enterprises’ specific needs regarding environmental protection, electricity usage, load-bearing capacity, raw material transportation, and noise control.

Those willing to occupy upper floors are often medical device companies, many of which are engaged in R&D. On the other hand, the rent difference between floors is actually not particularly significant.

For example, in some facilities, the first floor rents for 1.3 yuan per square meter, while the second floor rents for 1 yuan per square meter.

Additionally, some companies have concerns about freight traffic and vibrations on upper floors.

Projects requiring large equipment, such as machining, tend to prefer the ground floor.

The currently promoted P+EPC+O model is specifically designed to address the issue of aligning industrial needs, providing an integrated solution.

When it comes to factory construction, we must return to the needs of the industry itself.

Starting from enterprise needs, we should establish a bottom-up feedback mechanism and reconstruct the entire chain—from facility design and supporting infrastructure to industrial services—to truly align with enterprise development.

To summarize, the essence of industrial development in high-rise buildings is a land-use intensification strategy, not merely a pursuit of building height.

After all, the vitality of a park’s long-term development does not lie in the number of high-rises, but in whether it enables enterprises to generate profits and grow.

The true prosperity of a local economy should not be measured by short-term land revenue, but rather by the long-term empowerment of industries.