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Tech firms drive Shanghai’s demand for premium office space

SHANGHAI is expected to surpass Hong Kong as the largest office market in China within a few years' time with total Grade A space reaching 11 million square meters by 2020, international real estate services provider JLL said in a latest report.

The city's central business district is set to receive approximately 1.1 million square metres of prime office space by then. An additional 3.3 million square metres of office development will be completed in the decentralized Pudong, Hongkou and Minhang submarkets.

"Domestic firms are expected to drive demand for Grade A office space in Shanghai, while more multinationals are anticipated to vie for prime office space to capture a larger slice of the burgeoning Chinese consumer market by 2020," said Joe Zhou, head of research for JLL China. "This high level of forecast demand for office space is likely to absorb the massive supply pipeline over time."

Notably, technology firms drove Grade A net absorption in Shanghai as well as in Beijing, Shenzhen, Guangzhou and Chengdu, JLL's data showed. Tech company-driven net absorption levels were higher than other sectors such as manufacturing in 2016, and tech firms are catching up with the absorption levels of financial services and professional services companies.

"Large volumes of capital funding are enabling more tech companies such as Didi Chuxing and Baidu to upgrade or expand to Grade A office space as they seek to make themselves more attractive to talent," said Megan Walters, head of research for JLL Asia Pacific. "This trend is supported on the supply side as well, with all four first-tier cities in China having rapidly-growing emerging CBD markets that offer large amounts of new Grade A space, usually at rents that larger tech companies can afford."


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