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Investors stay positive on Shanghai office market

INVESTOR interest in the Shanghai office market stayed strong in the second quarter of this year despite high prices and lower transaction volume, according to global real estate services provider JLL.

Between April and June, en-bloc real estate investment deals covering all property types totaled 19.4 billion yuan (US$2.85 billion) in the city, a decrease of 2.8 percent from the first three months and a year-on-year surge of 47.2 percent, JLL said in a report released today.

By asset types, office buildings continued to be the most sought-after properties among investors, accounting for 92.1 percent of the total. Retail space trailed with a 3.1-percent share, followed by a 2.1-percent stake held by industrial investments.

"Limited availability of quality assets for sale in the market, especially after the frantic buying spree in the fourth quarter of last year, was one of the key reasons behind last quarter's slowdown," said Johnny Shao, head of capital markets for Shanghai and East China at JLL. "In addition, the sellers' pricing strategy of offering limited discounts to buyers also prolonged the decision making of potential deals."

Foreign investors seemed to play a more active role in the market as they were responsible for two of the largest transactions during the period. Major deals included CapitaLand's purchase of Guozheng Centre for 2.64 billion yuan in May and Keppel Land China's acquisition of Hongkou SOHO for 3.6 billion yuan in June.

Nationwide, major real estate investment deals jumped 53 percent year on year to 85.4 billion yuan in the first half of this year with Shanghai contributing 46.1 percent of the total, JLL said.


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