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Office rents seen flat in Q3 as supply firms
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Grade A office rents in both core and decentralized areas of Shanghai remained generally flat in the third quarter and are unlikely to rise in the coming year mainly due to abundant new supply, international property consultancy Savills said in its latest research.
Between October and December, a total of 784,000 square meters of Grade A office space, covering both core and decentralized locations, is scheduled to come onto the market.
That compared to about 127,000 square meters of new supply across the city during the third quarter, Savills said.
“Judging from the looming new supply, Shanghai’s Grade A office rents are unlikely to increase in the next 12 months,” said Chester Zhang, associate director at Savills.
“However, the large volume will leave a very limited impact on the overall vacancy rate as nearly 90 percent of the space is earmarked for self-use.”
The upcoming supply will probably allow large space occupiers to have more room to haggle over their rent, especially in the early stages of leasing promotion, Savills said.
From the tenants’ perspective, new economy industries, such as IT and new energy vehicles, will likely see accelerated growth and therefore generate demand for office space.
Co-working space operators, which have been a main source of demand in Grade A buildings in core locations over the past few quarters, are expected to extend their footprint to decentralized areas as the market is close to saturation in downtown locations.
Grade A office rents in Shanghai’s core locations averaged 9 yuan (US$1.3) per square meter per day in the third quarter, and stood at 5.8 yuan per square meter per day in decentralized areas, Savills data showed.
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