Shanghai to increase supply of office space

Shanghai's government has said it will expand the supply of new commercial space in the city by three million square metres over the next five years to meet growing demand from multinational corporations.

The new supply, according to the Shanghai State-Owned Asset Supervision and Administration Commission, will be made available in Lujiazui Finance District, Pudong's new financial hub.

The commission also announced that the Shanghai Centre development in Lujiazui had been approved. Details of the building plan have not been finalised, although it was reported that the developer planned to build a 580-metre office block on the site, which would be the mainland's tallest building.

Many international corporations have encountered problems looking for space to expand as there has been limited new supply for the past two years, said Vincent Luk Fung-siu, the general manager for East China at DTZ.

But Mr Luk said he believed Shanghai office rents and prices - ranked as the highest on the mainland - would remain intact.

Developers will release the new supply on the market in phases rather than all in one go, he said.

Average monthly office rents in Shanghai were US$38.30 per square metre, 43 per cent higher than Beijing's US$26.60 per square metre and double Guangzhou's US$19.20 per square metre in the fourth quarter of last year, said Knight Frank.

The property consultant said average office prices were US$5,743 per square metre, compared with Beijing's US$2,832 per square metre and Guangzhou's US$3,329 per square metre.

It will affect the competitiveness of Shanghai if office rents continue rising, said Knight Frank director and head of research Xavier Wong.

Vacancy rates in Shanghai were 2.5 per cent, compared with Beijing's 16.1 per cent and Guangzhou's 9 per cent, said Mr Wong.

Mr Luk said high-quality grade A office buildings remained sought after with the pre-letting of office space at Shanghai IFC generating a good response.