Shanghai Office Rents Headed For Second Year Of Falls

Source : The Business Times, January 20, 2009

10m sq ft of new property coming onstream this year

(SHANGHAI) Shanghai office rents, which fell in 2008 for the first time in eight years, are expected to decline further this year as almost 10 million square feet of new property comes onto the market.

Buyers' market: China's richest city added 930,707 sq m of office space last year and will introduce another 870,000 sq m this year, says CB Richard Ellis

The city's market for office space 'is expected to see a continued rise of market vacancy from 10.5 per cent at the end of 2008 and the rents to trend further southward', according to a report by property consultants CB Richard Ellis Inc distributed yesterday.

Average office rents in Shanghai fell 0.4 per cent last year to 241.8 yuan (S$52.84) per square metre per month, the report said.

China's richest city added 930,707 square metres of office space last year and will introduce another 870,000 square metres this year, creating a glut of supply just as the worst financial crisis since the Great Depression erodes spending by companies, said CB Richard Ellis. Shanghai's government expects economic growth of 9 per cent in 2009, compared with a pace of 13.3 per cent in 2007.

This year will likely 'remain a buyers' market' in Shanghai, CB Richard Ellis said.

Total investment in Shanghai property fell 25.8 per cent last year to 14.6 billion yuan, according to the report. That annual decline was the result of a 67 per cent decline in investment during the second half of 2008, after first half spending rose 25 per cent from a year earlier, CB Richard Ellis said.

Rents for industrial and shipping facilities fell 3.1 per cent in the fourth quarter from the third to an average of 36 yuan per month per square metre, the report said.

They rose 4.9 per cent for the whole of 2008, it said. Factory rents, including in the industrial and shipping category of properties, fell in both the third and fourth quarters, CB Richard Ellis said without giving figures.

Retail space rents in Shanghai rose at a slower pace last year than in 2007, gaining 7.6 per cent compared with a pace of 9.1 per cent a year earlier, according to the report.

Rents in the luxury residential market also fell, with prices for serviced apartments declining 5.7 per cent, apartments down 3.2 per cent and villas sliding 4.3 per cent. The number of luxury apartments and villas sold last year fell 59 per cent from a year earlier, CB Richard Ellis said.

Fewer transactions didn't stop the price of luxury homes from rising. The average price of luxury apartments increased 6.1 per cent last year, while villa prices rose 6.8 per cent, CB Richard Ellis said. -- Bloomberg