Shanghai’s Office Rentals Plunge

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lujiazui skylineSHANGHAI, Jul. 1 – Rental prices for the city’s high-grade office spaces have plunged because of rising vacancies aggravated by the global financial crisis and abundant supply of office space.

Real-estate services provider, Colliers International, reports that the prices for the city’s Grade A office buildings dropped by 9 percent to RMB7.1 per square meter, or around US$1.04 a day, beginning June.

Moreover, vacancies increased by 1 percentage point to 14.1 percent on average during the same period. “While the city’s residential market has witnessed notable rebounds over the past few months, the local Grade A office market is still far from recovery due to slack demand from tenants coupled with abundant new supplies,” Hingyin Lee, director of research and advisory for Colliers’ East China operations told Shanghai Daily. “We don’t expect any major revival of the office market at least until the end of next year.”

In Pudong, average rental prices for offices dropped by 13.3 percent compare to decrease of 5.9 percent in Puxi. More specifically, Lujiazui rentals are now RMB7 per square meter a day, a price drop of 13.5 percent.

Premium Grade A buildings and other newly completed buildings are even having a harder time at getting tenants compared to Grade A buildings with vacancy rates reaching 18.8 percent on average. This is in comparison to Grade A buildings which reported vacancy rates of 12.5 percent.

Colliers International forecasts that prices may spiral further down as the HSBC Building, 21st Century Tower and Poly Plaza becomes finished in the second half of the year.