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Grade A office vacancies high

THE overall vacancy rate at Shanghai's Grade A office buildings has hit a record high since 2005 in the first quarter of this year, with Pudong New Area being the hardest hit due to a supply glut worsened by weakening demand.

The vacancy rate at the city's Grade A office buildings reached an average 12.3 percent between January and last month, with Pudong's rate at 16.5 percent and Puxi's at 9.7 percent, Colliers International, one of the leading real estate service providers, said yesterday.

"It is also noteworthy that the vacancy rate at Premium Grade A offices, for the first time since 2006, exceeded that at ordinary Grade A buildings," said Hingyin Lee, director of research and advisory for Collier's East China operations. "The city's overall vacancy will continue to go north to around 20 percent by the end of this year."

A sluggish momentum continued to hover over the city's Grade A office market during the first three months, with most transactions coming from lease renewals or companies downgrading to other locations. For new buildings completed during the period, such as the Gubei International Finance Center Phase I in Changning District and BEA Finance Tower in Lujiazui, a subdued market condition created a more than 50 percent higher vacancy rate during their pre-lease, industry analysts said.

Meanwhile, the average rent is expected to drop by 20 percent to 6.50 yuan (95 US cents) per square meter a day by the end of the year, from 7.60 yuan per square meter a day during the first quarter, Colliers predicted.

The average rent in Jing'an has plunged the most by 30 percent from its peak in the third quarter of last year, followed by Huangpu and Pudong's Lujiazui, which both dropped between 25 percent and 30 percent. But Jing'an still registered the highest average rent of 8.90 yuan per square meter a day, followed by 8.20 yuan in Luwan, 8.10 yuan in Xuhui and 8 yuan in Lujiazui.

In the next three years, a total of 2.2 million square meters of Grade A office space are expected to be completed in the city, with Puxi and Pudong each taking about half of the total, Savills Property Services (Shanghai) Co said in a report released yesterday.


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