SHANGHAI: Puxi tenants can expect to be spoiled for choice as more office units are coming into supply as reported in Knight Frank’s Shanghai Office Market Report 2Q 2014 (2Q14).
As the office market grows, landlords are also lowering their asking rents to attract tenants, resulting in a significant decrease in Puxi’s Grade-A office rent causing a rental gap in certain areas.
The average rent of Grade-A offices in the overall market went down 1.1% quarter-on-quarter (q-o-q) to 8.9 yuan (RM4.60) per sq m (psm) per day.
Further causing the decline is the increasing number of expiring existing leases in Huangpu and Jing’an districts.
Despite the continuous decline of average rent in Puxi, Grade-A office rents remained stable.
The 2Q14 saw Shanghai’s premium Grade-A offices charting a rise of average rent by 0.8% q-o-q to 12.2 yuan psm per day against downward market trend.
Pudong recorded more Grade-A rental transactions compared with Puxi, placing the rental gap at 0.4 psm per day in 1Q14 to 1.1 yuan psm per day in 2Q14.
Although the market remains popular in Pudong, vacancy rates still declined by 0.9% q-o-q to 0.6% recording its historical low.
Knight Frank expects to see more new supplies coming on board by 3Q, particularly in the emerging business districts.
New completions will include the Oriental Financial Centre, SoHo Fuxing Plaza, the Hub Tower 1 and Shanghai Point. This will result in 331,000 sq m of Grade–A space to the market.
With a huge amount of supply expected in the foreseeable future, some landlords with adopt a new strategy of adjusting their completion dates to avoid competition.
This article first appeared in The Edge Financial Daily, on August 22, 2014.
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