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Shanghai Office Rents Slide as Property Investment
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Shanghai grade A office rents continued to slide during the first quarter of the year as the COVID-19 induced downturn dragged on leasing rates, according to reports from some of the world’s largest property consultancies.To get more news about China property market 2020, you can visit shine news official website.
Grade A office rents in the city’s central business district slipped 0.9 percent compared with the previous quarter according to JLL, while rents in decentralised areas, where there is greater vacancy, fell 2.4 percent. Asking prices for offices slid as businesses reassessed requirements and postponed leasing decisions, while some firms faced tightened budgets, according to the Chicago-based firm’s quarterly report on the Shanghai property market. Despite the downward trajectory for rents, JLL said that government measures to boost the economy, such as easing access to credit, will pave the way for recovery, at least in some industries.
“While the outbreak presents immediate challenges, we believe the market will benefit from policy support, and resilient sectors such as financial services, TMT, and healthcare will reinforce their significance to office demand over the medium to long term,” said Anny Zhang, JLL’s head of markets for China. Postponing Decisions Cushman & Wakefield painted a similar picture in noting that, despite a sharp decline in leasing activity, a number of corporations opted held onto their existing premises during the first three months of the year, including ChangSheng Life Insurance renewing a 2,000 square metre lease at Henderson 688 in Jing’an district. The Expo and Qiantan submarket in Pudong was also popular during the first three months of the year, according to Cushman & Wakefield, global manufacturing and healthcare companies relocating to the emerging district south of Lujiazui along the banks of the Huangpu river.
Chemicals company Lubrizol relocated from the Majesty Building in the Lujiazui financial district to a 4,000 square metre space in the Qiantan World Trade Centre, while French water management firm Veolia made the switch from 25 Meigui South Road in Waigaoqiao to a 3,500 square metre space in the New Bund Centre, which is also in Qiantan, according to the agency report. Cushman & Wakefield said the downward pressure on rents was due to a combination of the impact on business from the pandemic and new supply coming onto the market – with the opening of the Baohua Centre in Jing’an and the West Tower of CapitaLand’s Raffles City The Bund in Hongkou contributing 113,530 square meters of fresh office space to the city . Lujiazui, which has traditionally been the most sought after of Shanghai’s core sub-markets, saw average rents fall 2 percent to RMB 341.9 per square during the quarter – from RMB 350 per square metre in the same period last year.
The containment measures and economic uncertainty that weakened leasing demand during the period also had an impact on capital markets, with only four significant assets being traded in Shanghai during the quarter, according to Savills. With the pandemic breeding uncertainty, property investment across all sectors stalled, dropping nearly 78 percent compared to the first quarter of 2019 to total just RMB 12.4 billion during the period from January through March, according to Savills, which tracked deals over RMB 500 million. A pair of office deals made up over 82 percent of the first quarter’s total, with domestic buyers making both purchases as foreign capital has stood on the sidelines so far this year. In the larger of the two deals, Shanghai government-controlled investment bank Haitong Securities agreed to buy a trio of office buildings worth a combined RMB 7.5 billion in a Greenland Group project on Shanghai’s Bund.