the cost per sq m of grade A offices in Shanghai’s core business area after the P2P tenant exodus
Road, Jing’an, People’s Square and Huaihai Road will be diluted to ease the soaring rents.”
Zhang added that most of the supply can be found in decentralized areas such as Hongqiao CBD, which is expected to provide an additional 92,000 sq m of office space this year, and another 66,400 sq m in 2018.
The Hongqiao CBD’s vacancy rate spiked to 21.5 percent from January to June and could continue to increase. Similarly, the former 2010 Shanghai Expo site of Qiantan is projected to have an additional 155,740 sq m in 2018 alone.
Looking ahead and past the next two years, industry experts said that Shanghai’s drive to become a multifaceted hub for finance, trade, shipping, research and culture by 2040 will only attract more individuals to the city to work, in turn easing oversupply.
Compared to traditional office zones, newly developed areas often have to spend years jostling for the attention of potential tenants due to their underdeveloped facilities, infrastructure and transportation network. But they are not without benefits.
“These decentralized office areas do offer a good deal for corporations looking to buy an entire building as their regional or global headquarters,” said Lau.
“Also, the large supply of office space and the stable rates in these decentralized areas make them the ideal location for companies with manufacturing divisions,” he added.
Professional office developers for office spaces in decentralized areas have been advised to be proactive in planning, positioning and marketing their office buildings to potential clients.
Zhang suggested that developers strive to differentiate themselves from competitors by offering incentives such as shuttle bus services, metro stations, laundry rooms, inbuilding dining facilities as well as gyms.
Due to the rising population of startups as a result of the city’s drive to become an global hub for technology and innovation, many entrepreneurs have chosen to set up their companies in more flexible shared office environments instead of traditional office spaces.
However, experts are not worried that such a trend will adversely impact the office rental industry.
“Before this trend took place, people were already using co-working spaces in the form of business centers,” said Lau.
“I don’t see how the traditional office market will be affected by the development of the shared office concept — they serve totally different clients: the former offers service to mature enterprises, while the latter is targeted at young and high-tech business startups who require more flexible environments. Besides, startups could eventually become a premium client for traditional office buildings.”