Shanghai’s Grade A office market is expected to nearly double by 2020, reaching 13 million square metres and surpassing Hong Kong as the largest commercial market in Greater China according to a pair of studies released today.
Despite recent the recent slowdown in rental rate growth for Shanghai’s office market, the reports by real estate consultancy JLL predict ongoing growth in demand, and low vacancy rates for commercial space through to the next decade.
JLL’s white papers, “Offices 2020 Shanghai: Double the Stock, Double the Demand?” and “Offices 2020 Shanghai: Building China’s Global City”, anticipate the expansion of Shanghai’s economy, particularly in services and retail will keep vacancy rates below 10 percent in 2020, despite an 80 percent increase in available space.
Growth in office space in Shanghai is expected to lead all of Asia Pacific. (Image courtesy of JLL).
According to a report from JLL rival Knight Frank, office rental rates grew only 0.7 percent during the fourth quarter of 2014, driven by strong growth in Pudong’s Lujiazui financial district. Outside of the financial district, rental rates actually dropped throughout the city, even in prime areas of Puxi on the west side of the Huangpu river.
Shanghai’s Grade A Space to Increase by 80 Percent
The two surveys project that in the process of building Shanghai into an international financial and trading center, growth in the service sector will generate sufficient demand to absorb new supply in Shanghai’s Grade A office market. In particular, the agency points to growing demand from the globalization of Chinese corporations and emerging industries.
Pudong’s Downtown to Expand While Puxi Churns
If the white papers are correct, then the Shanghai city government’s plan for driving growth in Pudong is bound for big things, as business from the already successful Lujiazui financial centre spills over into nearby areas such as Qiantan.
However, there will also be big changes on the west side of the river as well.
“Expansion requirements and rising rents will lead an increasing number of large-sized occupiers from the healthcare and retail industries to gradually move out of the CBD.” said Joe Zhou, JLL’s Head of Research for East China. However, the report sees these companies being replaced by the client-facing arms of multinational Chinese companies and emerging industries in the CBD.
If you are interested in reading further, just click the links below to download the full reports, and the nifty (if a bit wordy) infographic.
Offices 2020 Shanghai: Double the Stock, Double the Demand?
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