AN ISSUE OF SPACE
While industry insiders forecast a boom in office space in Shanghai, overabundance is not expected to be a big problem in the coming years
surge from 6.4 million sq m in December 2015 to 8.95 million sq m and 9.55 million sq m in 2017 and 2018 respectively.
Analysts forecast that the decentralized areas will experience a similar growth — there will be a supply of 1.5 million sq m and 1.1 million sq m throughout 2016 and 2017, in turn driving the total stock of grade A office space to 4.46 million sq m and 4.8 million sq m in 2017 and 2018 respectively.
Furthermore, several peerto-peer lending enterprises (P2P) have been forced to move out of premium office buildings such as Shanghai Tower after the municipal government announced measures to regulate the rampant and risky industry in the first quarter of this year.
The new regulations sent a shock wave through the city’s office leasing market as a number of P2P companies vacated their premises, resulting in a rapid dip in occupancy rates across office buildings in Shanghai’s core business districts.
Accounting for more than 10 percent of the financial sector’s office leasing demand, P2P tenants exert considerable influence in the central business district.
According to data by Colliers International, the rental prices in Shanghai’s grade A office market slid 0.5 percent to 10.3 yuan per sq m per day following this exodus.
Some industry experts believe this projected abundance of office space will have a varied impact across the city, but may ultimately encourage the healthy development of the market.
“The actual facilities, locations as well as asking prices are quite different from project to project, which means the effective supply is actually much lower than our expectations,” said Albert Lau, CEO of Savills China.
Zhang Yue, office executive director of CBRE Eastern China’s advisory and transaction services, said that “the limited supply of office spaces in locations such as West Nanjing
Huaihai Road (left) and Lujiazui (center) are popular locations for companies to have their offices, meaning that space availability is usually low and rental prices are high. Developers have urged businesses to consider setting up their offices in the Hongqiao CBD (right) where space is aplenty and rates cheaper.
New office buildings are constantly popping up in Shanghai, providing an abundance of working space for businesses and creating fierce competition between developers.