MARKET OVERVIEW
The quarter was marked by a stabilization of available units across most size categories, following the sharp declines of last quarter. Within the city, the most obvious trend we see emerging is a shortage of stock in the RMB6.5-8/sqm/day range, with many buildings either trading above or below these levels, which is effecting some of the medium sized tenants looking for secondary Grade-A buildings. In general rents seem to have risen slightly over the last quarter, particularly in Pudong, where we expect further pressure next year.
LARGER OFFICES
There was a more gentle fall in the availability of 300-500sqm offices through the quarter, down to 42 from 50 last quarter. Availability of stock breaks into two main price categories, the fist being the budget office towers in the RMB5.0-6.5/sqm/day range with 18 units in this range. The second category was at the top end of the market, with 12 units in the RMB10-12/sqm/day range, representing a similar number to the last quarter. The biggest struggle for space continues to be at the budget end of the market where we could find only 10 units price below RMB4.0/sqm/day.
SMALLER OFFICES
The number of units in the 200-300sqm stabilised somewhat quarter-on-quarter with only 41 units available as of December. There were some 10 units available below RMB4.0/sqm/day rental bracket. The largest congregation of availability was around the RMB6.0/sqm/day rental range with 15 in this category. ?Availability of smaller units in the sub 200sqm showed a slight drop to 98 in December. Distribution remained broadly constant with the majority (43) of units in the RMB5.5/sqm/day range. However, there were an additional 12 units in the RMB9-10/sqm/day range. We see this as an indication that rents are starting to split slightly between those at sub RMB6.0 and those above RMB8.0, with rather a gap beginning to appear between these two ranges.
PUDONG
This quarter only 15 buildings claimed to be fully rented out, perhaps a combination of more candid landlord feedback and a balancing out of the market. We were able to identify 25 available units in the 100-200sqm range and a further 19 between 200-300sqm. For smaller occupiers, some of the best deals currently available come from strata title buildings (developed and subsequently sold off to private landlords). These offer high quality Grade-A offices in smaller lot sizes and at affordable prices. Examples of this type of building include Zhongrong Hengrui, Gongsheng Building and Double Dove. Dealing with private landlords often also entails a higher degree of flexibility in some of the terms achievable for the tenant.
OUT OF TOWN
Further out of town, some of the more exciting developments include two factory conversions. One along subway line 1 near Shanghai Circus, which combines a modern Grade-A office tower with some stunning former industrial buildings. Rents here start at RMB4.5/sqm/day. The other, unusually, is located in Pudong and combines both retail and loft office spaces. While in Hongqiao the new Multimedia Park offers excellent value for money for the large floor plates, located out towards Hongqiao Airport and close to the new subway line 9.
Happy Christmas & our best wishes for a successful 2008.
