Home > iDEAL Focus > Features > Mixed performance for Shanghai office market
Mixed performance for Shanghai office market
By Cherry Cao

SHANGHAI'S office market saw mixed performances in the third quarter of this year with Grade A rental growth remaining flat but purchases rising to the highest in four quarters, industry data showed.

Average rental of Grade A offices edged up 0.2 percent quarter on quarter to 9 yuan (US$1.43) per square meter per day during the three months' period ended September across the city. Insignificant growth in the Pudong New Area was partly offset by a dip on the other side of the Huangpu River, according to research by international real estate services provider Jones Lang LaSalle.

"Leasing demand has weakened as companies adjust for a slower economic forecast both in China and abroad," noted Anthony Couse, managing director of Jones Lang LaSalle Shanghai. "However, the limited supply in core areas such as Little Lujiazui has afforded landlords bargaining power and the ability to raise rents."

In Pudong, rents climbed at a slower pace, or 1 percent, from the previous quarter amid a pickup in leasing activity, mainly driven by domestic tenants from finance and IT sectors upgrading into Grade A office buildings.

In Little Lujiazui in particular, where no new lettable supply has been delivered since the third quarter of 2011, landlords continued to be confident, raising rents by around 3 percent compared to the second quarter. In Puxi, however, a 0.4-percent dip was recorded, extending weakness for the third straight quarter as new inquiries for office space remained subdued.

In the decentralized market, meanwhile, strong net absorption continued to be registered over the past quarter amid robust demand from tenants with large-scale expansion requirements.

While rental growth in the city's Grade A buildings slowed as economic outlook affected tenant strategy, the local office sales market posted quite a different picture with transactions exceeding 10 billion yuan (US$1.6 billion)during the third quarter.

Offices worth 10.02 billion yuan were sold across the city in the third quarter, a rise of 58 percent from the previous three-month period and the highest in four quarters, according to Soufun.com, which operates the country's largest real estate website.

By volume, purchases of offices rose 22.8 percent quarter-on-quarter to 4,448 units between July and September, the highest in five quarters, Soufun data showed.

By district, downtown Jing'an led all with total transaction value exceeding 2 billion yuan, closely trailed by the Pudong New Area and Zhabei, which recorded sales of 1.22 billion yuan and 912 million yuan, respectively.

"We've noticed that small-sized office units, commercial title apartments in particular, seemed to be the most popular among buyers," said Zhang Yinping, a Soufun analyst.

On the supply side, meanwhile, more than 450,000 square meters of offices were released to the local market for sale, an increase of 32 percent from the second quarter, according to Soufun.

Customer Service: (86-21) 52920164