After the Shanghai office market saw rents slide by an estimated 7 percent last year in the face of the COVID-19 pandemic and a glut of new buildings, leasing rates in the city’s core areas began inching upwards again in the first three months of this year.
Rents for Grade A office projects in traditional business districts, such as West Nanjing Road, Lujiazui and Huaihai Road, climbed by 0.43 percent in the period from January through March, compared to the fourth quarter of 2020, Cushman & Wakefield said in a report published late last week.
The uptick brought average leasing rates in the central areas to RMB 283.8 ($43.33) per square metre per month, and came after rents had fallen for nine consecutive quarters, according to the property consultancy.
Cushman & Wakefield said that “robust leasing activity” by tenants from the financial services, technology and professional services sector had contributed to the turnaround with a pair of US tech firms signing major leases during the quarter.
Suffering at the Fringes
While the office market in central districts of China’s commercial capital appears to have at least levelled off, landlords in outlying areas continue to compete for tenants amid a flood of new projects.
Rents in these “beyond the core” areas fell by 2.12 percent during the first quarter, compared to the last three months of 2020, with four of the five new office projects which entered the market between January and March being located in these fringe locations.
Vacancy across the Shanghai market stood at 15.5 percent during the first quarter, according to Cushman & Wakefield, with the firm predicting that rate to continue climbing over the next 12 months.
Adding to the flood of new projects coming online outside of Shanghai’s city centre during the first quarter were China Vanke’s Hongqiao Wanchuang Centre Phase I, the south tower of Sunglow Real Estate’s Sunglow Rivera Shanghai, Hong Kong-listed Sunkwan Properties’ Sunkwan Centre in Minhang district, and Jingrui Holdings’ recently renovated Maglink complex on Longyang Road in Pudong.
Together these four projects contributed more than 200,000 of the 236,633 square metres (2.55 million square feet) of office space added to the Shanghai market during the quarter. Cushman & Wakefield noted that another 5 million square metres of additional supply is expected to come online in the city through 2025, increasing the existing stock of 13.77 million square metres by more than 36 percent.
During the first quarter, the only project to open up for leasing in central Shanghai was local investment firm Baohua Group’s JC Plaza, a renovation of the former JC Mandarin Hotel on West Nanjing Road, the office portion of which covers 35,807 square metres according to C&W.
Later this year Henderson Land’s Lumina project on Longyao Road in southern Xuhui district will make 169,943 square metres of new space available, with South Korea’s SK Group expected to chip in another 123,075 square metres this year with its Shanghai SK Tower on Jiming Road in Pudong’s Expo area.
Amazon and Clubhouse Take Up Space
The biggest lease of the quarter came from one of Shanghai’s largest local financial institutions, with SPD Bank leasing 25,000 square metres in Raffles City The Bund, a joint venture between CapitaLand and Singapore’s GIC in Hongkou district.
Despite ongoing political tensions between the US and China, a pair of US tech firms expanded their Shanghai footprints during the first quarter, with Amazon making the biggest dent in the city’s office surplus with its lease of 9,900 square metres at Lujiazui Group’s Qiantan Centre in Pudong.
The US e-commerce giant reportedly needed the new space to accommodate a growing team. Online chatroom startup Clubhouse also grew its presence along the banks of the Huangpu by taking up 5,000 square metres in Soho China’s Bund Soho project.