Office deals dominate Shanghai real estate

Buildings in the financial center of Lujiazui, Pudong district of Shanghai, on April 7. Office building transactions continue to dominate Shanghai's real estate market, which saw continued increases in rental levels and trading volumes, and growing interest from local investors. [Photo / China Daily]

Office building transactions continue to dominate Shanghai's real estate market, which saw continued increases in rental levels and trading volumes, and growing interest from local investors, according to the latest commercial property report on China by the international property services firm DTZ.

Transactions involving office buildings accounted for as much as 73 percent of the real estate volume in the first half of 2012 in the city, according to the report which was released on Tuesday.

Transaction involving office buildings counted for 67 percent of the total real estate volumes in 2011, the company said.

Office space covering 435,707 square meters was traded between January and June in 2012 in Shanghai, and the average price jumped from about 17,000 yuan per sq m in January to 25,000 yuan per sq m in June.

Average rental for Grade A office buildings in Shanghai saw a 4.1 percent year-on-year growth, the half-year report said.

In Jing'an district, one of Shanghai's busiest downtown areas and a cluster for Grade A office buildings, rents saw a 13.3 percent year-on-year growth, said Shaun Brodie, head of East China Research, DTZ China.

In the first quarter of 2011, Grade A office rentals in Shanghai were 8.7 yuan per day and had risen to 9.2 yuan per day in the fourth quarter.

That compared to Grade A office rent at 4.8 yuan per day in Guangzhou, 4 yuan per day in Nanjing, and less than 2.5 yuan in Suzhou and Ningbo, suggesting a reason why many organizations continue to target Suzhou and Ningbo as perfect for back-office functions, the report said.

Total trade volume in real estate market in Shanghai reached 12.7 billion yuan in the first half of 2012, a 37 percent year-on-year decrease.

DTZ said that the real estate market still presents a golden opportunity in Shanghai. However, many foreign investors are still unable to raise the money to buy, added Jim Yip, director of the investment department at DTZ China.

Foreign investors were more likely to target opportunities in office buildings in second- and third-tier cities, while domestic investors continue to eye Beijing and Shanghai, said Yip.

A large proportion of buyers in all transactions were domestic, and about 78 percent of the money involved in the trades were from domestic buyers.

Elsewhere in the report, about 57 percent of block transaction were for private use, much higher than that of the first half of 2011, which saw only 16 percent.

Office buildings located in main business districts remain more attractive than those outside the central areas.

The report used the example of Shanghai Kerry Center II, where the letting rate rose from 10 percent to 70 percent, though the rent rose in price from 9 yuan to 12 yuan per square meter per day, said Yip.

Li Xiuhui contributed to the story.

wuyiyao@chinadaily.com.cn