Shanghai’s office market is said to be on its way to surpassing Hong Kong in size by 2020, and the rise in demand for land from developers eager to provide homes for the city’s fast growing finance firms, tech providers and other service industries was evident last week as developers submitted three bids of more than RMB 2 billion ($291 million) for a site in the Xujiahui area of Xuhui district.
A total of five local developers, including a three company consortium submitted bids for a mixed-used commercial site composed of three plots along Longhua Road next to Longhua port in the traditional commercial district in southern part of central Puxi, according to an announcement from the city land bureau.
The bids by the local firms follow the lead of Hong Kong developer Sun Hung Kai, which in 2013 paid a record price for a 100,000 square metre (1.1 million square foot) site along Hong Qiao Road in Xujiahui, as Shanghai’s rising office rentals and growing commercial sector enhance the attractiveness of what has long been considered a B-grade location in China’s commercial capital.
100,000 Square Metre Site to Be Open for Bids
The 106,713 square metre site, which had been put up for sale by the local government, attracted a high bid of RMB 2.064 billion from a consortium of Zhuhai Yuanshi Industrial, Zhuhai Wanyin Enterprise Management and Shanghai West Bund. Suzhou Yaolong Investment Management offered RMB 2.062 billion, and Shanghai Ruixin Real Estate Management bid RMB 2.056 billion.
Since three developers bid for the site, the sale will now be opened for general tender, although no fixed schedule for the tender process has yet been publicised. One of the three plots is zoned for office, and comes with 50-year land use rights, while the other two plots are indicated for retail use and are limited to 40-year terms.
Shanghai Office Market to Grow by More than 10% in 3 Years
The office portion will form part of a flood of 1.1 million square metres of new space entering the market in the next three years, according to JLL. The international property consultancy now predicts that Shanghai will reach 11 million square metres of office space by 2020, surpassing Hong Kong as the largest office market in Greater China.
Despite the large amount of new supply entering the market, not everyone is convinced that there will be oversupply.
“Domestic firms are expected to drive demand for Grade A office space in Shanghai, while more multinationals are anticipated to vie for prime office space to capture a larger slice of the burgeoning Chinese consumer market by 2020,” says Joe Zhou, Head of Research, China at JLL. “This high level of forecast demand for office space is likely to absorb the massive supply pipeline over time.”
The Xujiahui Makeover Continues
Whichever developer ends up winning the Longhua Road site, is likely to get a boost from Sun Hung Kai’s efforts to add another grade A project to the area.
Sun Hung Kai’s Xujiahui Centre occupies a sprawling 100,000 square metre site to the north and west of the Longhua Road site, and will have added more than 706,000 square metres (7.6 million square feet) of new commercial and hotel space to Xujiahui when its completed in 2023.
Sun Hung Kai, which set Shanghai record when it bought the land in 2013 for RMB 21.8 billion ($3.5 billion at the time) is building a 370-metre office tower on the site which will be the tallest skyscraper west of Shanghai’s Huangpu River.
Malls, Offices and Now Sports
In addition to that Mecca of shopping and commercial space and not far away from the ITC project, Xujiahui is also getting a massive sports venue. Earlier this month it was announced that Shanghai’s largest sports venue would be going up in Xujiahui — the Xujiahui Sports Park. The project will cover 406,000 square meters by Caoxi Road North, Lingling Road, Tianyaoqiao Road and Zhongshan No.2 Road South.