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Hongqiao offices, not a term which normally conjures up great excitement on most people's brow. This appendage to the centre of the city, popular for its comfortable villas, golf courses and Carrefour, doesn't grab the headlines when it comes to the newest offices or highest rents. It does however fulfil an important auxiliary function to the downtown areas of Shanghai. Convenient for many workers living in the west of the city - particularly the bosses and, for those companies requiring regular access either to the Hongqiao airport of western manufacturing zones around the city.
The core office region in Hongqiao is found around the Sheraton and Renaissance Hotels. Somewhat misleadingly termed 'New City Centre' the area combines a range of Grade-A and Grade-B office towers along with some shopping and restaurant facilities. The most notable absence from this area is the subway, with the nearest stop on Line 3 over 15-mins walk away. While other less known areas, including those around Hongmei Rd. provide a range of more local buildings - some of them very good value. Finally, the new office developments around Zhongshan Park station, though not strictly speaking Hongqiao, as part of the office pool contributing to this area.
Office rents in these areas are markedly different from comparative buildings in the central downtown area. The most expensive rents around the Sheraton and Renaissance Hotels are in the region of US$1.20/sqm/day (Shanghai International Trade Centre). However, with a budget of US$0.80/sqm/day clients can expect to secure premium Grade-A office space. Indicating a rental differential between here and the central downtown areas of some 20-30%.
The area around Zhongshan Park subway station (Line 2) has recently seen a significant amount of office development. Combining single owner developments and, those where the building has been sold off to small investor/landlords. Early investors in some of these buildings are likely to see initial yields of between 8-9% on their purchase costs. There have also been some strikingly impressive developments in terms of building specification (including raised floors - still seldom seen in Shanghai), which are being offered at very competitive rents of around US$0.56/sqm/day. Representing real value in a market where both capital and rental levels continue to rise strongly. However, it must be said for some of these buildings, access to shopping and eating facilities is certainly more limited than those around the more central Hongqiao developments.
"Good for investment, better for leasing"
For the more intrepid, local style offices around Hongmei Rd. offer a real budget alternative compared both to New City Centre Area of Hongqiao and downtown offices. Here rents as low as US$0.25/sqm/day mean most of the tenants remain local firms. However, we have seen evidence of some non-local firms, particularly in the manufacturing and textiles industries, looking at these alternatives. For those who need easy access from the west of the city, in offices which do not feature a high degree of client facing interaction, they can be attractive alternatives. Again, lack of public transport facilities, particularly the metro and very local choices of restaurants and shops, may discourage some firms.
"Traditional look at local rents"
Its unlikely Hongqiao will ever see the demand levels commanded by either central downtown areas or prime Pudong office space around Lujiazui. However, a diverse range of offices from high specification Grade-A through to budget alternatives combined with improved infrastructure, leave it well placed for those companies with a specific location requirement or looking to save costs on their office location.
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