Shanghai Grade A office to see strong demand in 2011

SHANGHAI: Demand for Shanghai grade A office will remain strong this year due to the influx of enterprises from the financial, banking and consulting industries, reported Knight Frank in its latest Shanghai Prime Offices quarterly report.

An annual growth rate of about 10% is projected for the Grade A office market for the year.

Demand will not come solely from MNCs as in response to more central government-owned enterprises setting up headquarters in Shanghai, a substantial number of of well-known domestic enterprises are becoming more attracted to Shanghai as a base.

There are already eight central-government-owned enterprises and more than 100 regional headquarters or operating departments in the city.

In total, nearly 2,500 central-government-owned enterprises have already invested in the city, said Knight Frank.

Between January and November 2010, statistics showed 41 MNC regional headquarters, 19 foreign investment companies, and 13 foreign R&D centres were approved to operate in Shanghai. This brings the total number to 301 MNC regional headquarters, 210 foreign investment companies and 317 foreign R&D centres by November.

The increase is a reflection of the Shanghai's government's efforts to meet their goals of opening up the city to foreign investment, said Knight Frank.

Meanwhile, the city Grade A office supply is expected to peak in 2011 with a total of more than 9.9 million sq ft of newly completed office space.

Of the new supply, 69.5% will be located in Pudong while 30.5% will be in Puxi. The new supply includes Shanghai IFC Phase 2 in Pudong Lujiazui with a gross floor area (GFA) of 1.2 million sq ft, SHK's International Commerce Centre Phase 1 at Huaihai Middle Road of Puxi with a total GFA of 645,834 sq ft and Huamin Imperial Tower in Jing'an District with an office GFA of 538,195 sq ft.

Due to the significant incoming supply, Knight Frank estimated an increase in vacancy rate of 10% to 15%.

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