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Shanghai Office Market Report Q4 2016

Negative Net Absorption In Core Cbds Clouds Shanghai Office Market In Q4

In the fourth quarter (Q4) of 2016, nearly 654,000 sqm of new Grade-A offices were completed in Shanghai (See Table 1).

In Q4, the average Grade-A office rent remained stable at RMB9.8 per sqm per day, unchanged from the previous quarter (See Table 1).

Both global economic downturn and China’s economic growth slowdown restrained corporations’ business expansion and office space demand.

The trend of manufacturing companies moving out of CBD areas continued in Q4.

SOHO Tianshan Plaza in Tianshan, Changning is scheduled for completion in Q1 2017, providing 72,000 sqm of office space to the market.

In 2017, Grade-A office rents are expected to drop. Office rents are expected to decrease by 1% in Q1 2017 and decrease by 5% over 2017. The vacancy rate in 2017 is expected to reach 10%.

The trend of manufacturing companies moving out of CBD areas continued in Q4. China’s economic downturn forced many manufactures companies to focus on cost-saving, looking to relocate to offices in decentralised areas.

Corning Shanghai rented approximately1,600 sqm of space in A-REIT City@ Jinqiao and Germany-based nickel alloy producer VDM Metals rented 146 sqm of office in Central Park Pudong.

Technology companies were also active in Q4. Voice recognition company Naunce rented approximately 1,300 sqm in Century Link situated in Pudong Century Avenue. The HKEX also rented approximately 1,260 sqm in Century Link in Q4.

Over two million sqm new office space will be completed in 2017, with half of the new supply located in emerging business districts including Hongqiao CBD as well as the Pudong Post-Expo and Pudong Qiantan areas. China’s real economic growth has slowed down and the leasing demand in Core CBDs has softened, so more companies in CBD areas will consider relocating to emerging business districts with attractive rental rates, or renew the leases with landlords at existing rental rates. We expect office rents to decline in 2017 due to the dual pressure from both economic downturn and huge new supply.

shanghai-office-market-report

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