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September 15, 2009

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Home » Business » Real Estate

Prime office market starts to recover

SHANGHAI'S Grade A office market, the real estate sector hurt most by a global economic downturn which started to bite into the country around the last quarter of 2008, has been showing some signs of recovery amid robust demand especially from domestic companies.

The Agricultural Bank of China, the country's fourth-largest lender in assets, acquired more than 85,000 square meters in an office building in Pudong's Lujiazui area on Sunday for about 3.77 billion yuan (US$552 million), reinforcing the trend.

"The city's prime office market is regaining some momentum as both sales and leasing activities have picked up, particularly fueled by demand from financial institutions," said Hingyin Lee, director for research and advisory at real estate services provider Colliers International.

"It seems that Shanghai's plan to become an international financial center by 2020 has probably helped boost office demand sooner than expected."

Major office deals completed recently also include Shanghai Rural Commercial Bank's purchase of 10 floors at Zhongrong Jasper Tower for 1.05 billion yuan, as well as SOHO China's acquisition of a top office building in downtown Jing'an District for 2.45 billion yuan from the real estate arm of Morgan Stanley.

The leasing market has also regained some strength.

In a latest case, Development Bank of Singapore has reached an agreement with Lujiazui Finance Tower to acquire the building's signage rights by renting 10 floors.

"Major office transactions in Shanghai already totaled 8.2 billion yuan over the past one-and-a-half months," said Xue Jianxiong, an analyst with E-House (China) Holdings Ltd.

"The combined amount is expected to exceed 10 billion yuan very soon as a few more deals are already under serious discussions at the moment."

The Bank of Ningbo has shown interest in purchasing 20,000 square meters in 21st Century Tower in Lujiazui while a Hong Kong-based lender is also keen to acquire some space in an office building in the same area, industry sources said.


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