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October 28, 2009

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Growth forecast in decentralized offices

DECENTRALIZED Grade-A office stock is expected to more than triple in Shanghai over the next four years due to land constraints in CBD areas as well as rapid expansion of mass transportation.

High-quality office space located in non-CBD but urbanized areas, which is supposed to reach 500,000 square meters in the city by the end of this year, will likely jump to 1.8 million square meters by the end of 2013, real estate services provider Jones Lang LaSalle forecast yesterday.

"Shanghai is the first city on the Chinese mainland to develop a clearly defined decentralized Grade-A market," said Anthony Couse, managing director of Jones Lang LaSalle Shanghai. "It will become a major force in the city's office market as it offers tenants lower cost options in a short distance from the CBD with high-quality specifications."

About 83 percent of the total stock of decentralized Grade-A office space will be in the Puxi area and the majority of those projects will be between the Inner Ring Road and the Middle Ring Road, according to the company's research.

Putuo District is expected to take the largest share, or 26 percent, of the total market by 2013, followed by Hongkou District's 21 percent. The districts of Changning and Zhabei will each take about 14 percent.

The city's decentralized office market actually started in 2006 and its development has accelerated as a result of limited land supply in CBD areas.

Land constraints will begin to limit the future supply of office space in the city's CBD areas, which are slated to be completely built out beyond 2013. Meanwhile, fast expansion of the Metro network is making decentralized offices more convenient and accessible.

On average, decentralized space is currently 31 percent cheaper than CBD space in Shanghai, according to Jones Lang LaSalle Shanghai.


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