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HONG KONG: Landlords of grade-A office buildings in Shanghai enjoyed strong demand in core areas in the first quarter, pushing up average rents 7%, according to Colliers International.
But the property consultant said rental growth would slow as new supply increased in the rest of the year.
The average rental for grade-A space reached 7.60 yuan (RM3.48) per square metre per day, up 7% from the fourth quarter of 2010.
There was no new office supply in the first quarter but leasing demand from multinational and domestic companies remained robust, with many companies securing new premises.
Among the new leases were several Chinese companies.
Local manufacturer Modine took 1,500 sq m at BM International Continental Centre in the Zhabei district, logistics company Mainfreight leased 1,200 sq m in Huangpu district's City Point and Hong Da Trading took over 860 sq m in Wheelock Square.
As a result, the vacancy rate of grade-A offices in Shanghai fell slightly to 9.6% during the quarter.
Downtown vacancy rates were the lowest, with Luwan and Xuhui districts at 4% and 6.1%, according to the survey by Colliers.
However, the property consultant said the market could expect abundant new supply this year as several new properties were expected to come on the market. Between Apr 1 and June 30, seven new office towers will open, contributing 385,395 sq m to the overall supply. Among these projects, four are in Pudong: China Merchants Bank Tower, II ifc, Tai Ping Finance Building and International Commerce.
Colliers said the new supply would push up vacancy rates even though demand would continue to rise with domestic and foreign companies entering the market.
According to the Shanghai Statistics Bureau, 45 new regional headquarters, 22 investment-type companies and 15 research and development centres for multinational corporations were completed in 2010. The number of financial institutions in Shanghai rose from 787 to 910, of which 173 are foreign-based.
Major demand is expected this year, including the further expansion of financial institutions, professional services firms and local e-commerce and design companies. — SCMP
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