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October 27, 2009

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Home » Business » Real Estate

Grade A office rents drop at slower pace

RENTS for Grade A office declined at a lower pace in Shanghai in the third quarter of this year as a result of improved leasing activity and market sentiment.

The average asking rent dropped to 6.80 yuan (US$1) per square meter per day at the end of last month, down 3.6 percent from a quarter earlier. That compared with a 4.6-percent quarterly drop during the April-June period, real estate services firm CB Richard Ellis said yesterday.

On a yearly basis, the rent had declined by 21.6 percent over the past 12 months, according to the company's research.

"Though positive signs in office take-up began to emerge over the past quarter and are expected to continue amid a brighter business outlook and macro-economic forecasts, the average office rent will continue to dip primarily due to a significant amount of supply coming on stream," said Danny Ma, an associate director with CBRE. "Meanwhile, the overall vacancy rate is forecast to further go northward."

With the completion of three new buildings during the past quarter - Shanghai IFC-HSBC Tower, GC Tower and International Corporate City - the overall vacancy rate in Shanghai rose by a further 0.6 percentage point to 15.4 percent at the end of last month.

For the fourth quarter, some 270,000 square meters of new office space are projected to be launched in the local market, while new supply for next year is estimated at about 1 million square meters, according to CBRE.

During the past quarter, while occupiers from the less affected industries such as pharmaceutical and insurance remained the most active players in the leasing market, buying demand from owner-occupiers, especially domestic firms, also rose.

"Strong liquidity position and the ready availability of capital have enabled many domestic companies to purchase office space," said Alan Li, a director overseeing the office sector at Jones Lang LaSalle Shanghai.


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