MARKET OVERVIEW
Well itĄ¯s been another good year if you were a landlord in Shanghai. Clients will note there is continuing evidence of the market tightening from this time last year, in terms of unit availability. Take up in new offices such as Hongyi Plaza on Nanjing East Rd., has been impressive but choice for clients in the mid-sector office range is giving room for reasonable negotiation on most buildings. Wangjiao Plaza continues to struggle in attracting tenants and so probably offers the best quality smaller offices at attractive prices, for those willing to cross the YanĄ¯An divide. And, in spite of extensive coverage of the change in laws regarding ownership of property by foreigners, we are also beginning to see more evidence of smaller, more established firms, looking at buying their offices, as a hedge against further rental inflation.
LARGER OFFICES
There was a significant drop in the availability of 300-500sqm offices through the quarter, down to 30. The availability of this stock is again mainly found in the RMB3.0-4.75/m2/day range (i.e. mid-range Grade-B office towers) with 21 units available. Excluding new developments, the more established Grade-A office towers showed a sharp reduction in stock, with only 8 units available in the 400-500sqm range. However, this shortage is being comfortably offset by availability of space in the new developments such as Plaza 66, Donghai Plaza and Park Place.
MEDIUM OFFICES
The number of units in the 200-300sqm rose from 39 at the end of September to 50 in December. There were some 16 units available below RMB4.0/sqm/day rental bracket and a further 31 units available between RMB4.0-8.0/sqm/day. As mentioned above, the developments at Hongyi Plaza in Huangpu District and Ben Ben Mansion in JingĄ¯An, have provided attractive alternatives for clients looking for newly completed offices in this size range, at rents in the RMB5.0-6.0/sqm/day range. Good value second hand buildings include Jin Hang Building next to JingĄ¯An. at RMB4.8/sqm/day and Jian Jing Mansion on Beijing Rd. with offices from RMB2.5/sqm/day.
SMALLER OFFICES
Availability of smaller units in the 50-200sqm range fell from 249 at the end of September to 131 in December. The leaders of the pack in this range were at the budget end in the sub RMB4.0/sqm/day range where there were a total of 49 available units, with 47 units in the RMB4.0-7.0/sqm/day range. In reality, most of this stock will be taken up by the local market rather than overseas tenants. However, its existence is important because availability at this lower end of the market means less competition between local and overseas companies, for the slightly more expensive units. This size range was also where we have observed the most interest from potential buyers for owner occupation use.
ALTERNATIVE OFFICES
Following on from the 3,000sqm deal concluded with the Japanese occupier, on a newly refurbished warehouse located on Suzhou Creek. A number of new developments have continued to come onto the market, including some 8,000sqm on Suzhou Creek of impressive studio space at only RMB2.8/sqm/day. (Offered on a floor-by-floor basis in unit sizes of around 1,200sqm). In addition, there is an art deco style warehouse of some 6,000sqm being developed in JingĄ¯An District at rents between RMB4.5-6.0/sqm day, both of which are attracting attention from both large multinationals and local operators.
With evidence of rents stabilizing over the quarter, we expect this trend to continue up to and after the Chinese New Year. For clients considering a move between Christmas and the Chinese New Year the period would be a good negotiating opportunity to take advantage of landlords trying to close out their business. And as stock in the second hand buildings tightens slightly, we would recommend companies start their search process 3-4 weeks earlier than they might normally consider, giving time to assess the market and place yourself in a good position to cherry pick the right unit as it becomes available. Wishing you all a prosperous and happy New Year
