New Jiangwan Office Park


industry represents a key sector for development. According to property knowledge solutions provider Colliers International, in Q1 2012 Shanghai’s gross domestic product was up 8.5% over the previous year, while real estate investment continued its upward trend, increasing 9.5% in the first five months of 2012. In Q1 2012, the city’s commercial sector has witnessed an interesting shift, according to the Colliers Shanghai Property Market Review. Te report has observed how the steady decrease of available Grade A office supply in downtown Shanghai has led to the growth in the pre-leasing rate of new buildings. Consequently, the competition for downtown office space has led large occupiers to seek suitable property beyond the traditional business districts where infrastructure and amenities have improved significantly in recent years.


C


Increase of pre-leasing rate of new buildings According to the Colliers report, Shanghai witnessed a stable demand for


Grade A office accommodation in Q1 2012 with average rentals increasing slightly from US$ 1.29 to US$ 1.31 per square metre per day. “Te steady decrease of available Grade A office supply in downtown


Shanghai has led to growth in the pre-leasing rate of new buildings, as occupiers move to secure premises,” Colliers said. New high-end projects such as L’Avenue in Hongqiao and Jing An Kerry


Centre Tower 3 saw significant pre-leasing activity with over 50 per cent of these buildings now under offer, the report observed.


Shift to business parks As the city’s downtown area is running out of Grade A office space, firms are now moving into business parks. Te Colliers report indicates that while just a few years ago this shift would not have been viable, the improving infrastructure and amenities in Shanghai’s Business Parks are now attracting even top-tier firms with large space needs. “Te recent shift of focus from core downtown areas to Shanghai’s Business Parks appears to be gaining momentum on the back of improved infrastructure, better property developments, good local amenities and cost effective leasing terms,” said Jonathan Rideout, Director of Colliers International Business Park team. “Price is the obvious advantage with business park real estate costs


accounting for only 39% of that of Grade A office buildings,” he added. In addition to this, decentralisation of large corporations is also an indicator of their corporate identity, Rideout explained. “Firms often view business


haracterised by a strong local economy and solid infrastructure support, Shanghai is a modern and fast paced city whose real estate


Caohejing Pujiang


parks as the eventual destination when they have been successful and big enough to occupy their own building and warrant a culture strengthening campus environment,” he said. Colliers observed strong market sentiment for business park premises with stable leasing demand and a marked increase in investment demand in Q1 2012, with deals being concluded by major multinational occupiers such as Hershey’s and Roche. Colliers expects more multinational corporations to relocate to business


parks as a result of the growing costs in the CBD area. For example, Nike Inc., currently occupying a total of 20,000 square metres in downtown Shanghai, is looking at building a 56,000 square metre China headquarters in suburban Shanghai, Rideout said. “Te driving forces for [Nike’s] decentralisation were in part financial, but can also be understood by looking at Nike’s world and European headquarters, which are low rise, suburban campuses in green environments,” he explained. Rideout also mentioned that Xilinx, a semiconductor design firm, recently


relocated to a software park to save costs and to be closer to its clients and customers, and had only done so after the park’s metro was completed and had sufficient amenities. In the investment market, business parks are increasingly looked at


as favourable destinations to place capital by both yield investors and international developers, Rideout believes, although this has not always been the case. Historically, Shanghai’s Business Parks were special economic zones developed by the government where foreign investment was not welcome, he further explained. “However, as the market matured, the government and their park authorities have recognised the value that major investors can bring by either injecting capital to be used for other projects, or by increasing surrounding property values by the development of higher quality products,” he said l


Shanghai Market Snapshot Q1 2012


l Retail sector experienced strong growth with launch of three new shopping centres


l Industrial sector received increased interest in investment with low levels of vacancy, high quality tenants and increasing rental levels


l Residential property sales volumes shrank and prices down by 2% from previous quarter


MAY 2012 I CITYSCAPE I 23


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