Strong demand, FDI push up office rentals in Shanghai

  • Business
  • Wednesday, 23 Feb 2005

By KATHY FONG in Shanghai

THE continued influx of foreign direct investment (FDI) and accompanying strong demand for prime business locations are fuelling a rise in office rental in Shanghai, the financial hub of China. 

According to Shanghai Daily, the overall office vacancy rate in the city is at an historical low of 6.5%. The vacancy rate in prime areas, such as Jing An and Wang Pu, fell to 5% at the end of last year. 

To assure the availability of an office in the city, some multinational companies had even sealed tenancy agreements before the completion of the office blocks. The Chinese newspaper said such a trend was likely to continue given such strong demand for office space in Shanghai. 

The tight supply of office space has pushed up rentals, lifting Shanghai’s position on the list of the world’s most expensive office locations. 

According to a survey by Cushman & Wakefield Healey & Baker, Shanghai ranks 21st among 47 most expensive cities in the world, versus 29th last year. 

Focusing on premium office space, the European-based real estate company found that the average annual rent in Shanghai came to 345 euros (US$448) per sq metre. 

However, the city’s office rentals are still considered competitive compared with 723 euros (US$940) in Tokyo, which ranked third, and 461 euros (US$599) in Seoul. 

Hong Kong rose up the rungs of the world’s most expensive locations in terms of office space, climbing to fifth from 17th, with average rentals of 637 euros (US$828) per sq metre. 

Cushman & Wakefield Asia Pacific chief executive officer Michael Thompson in a statement: “Despite ongoing concerns within China that Shanghai is forming a real estate bubble, this global survey confirms how relatively competitive Shanghai’s premium office rents are compared with other world business capitals.” 

He believes that Shanghai’s competitive standing against other major Asian business centre would help accelerate the flow of FDI into the city and fuel continued expansion of its services sector.  

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