Shanghai business parks are a booming alternative

The Chinese city's downtown is running out of Grade A office spaces and firms are starting to move into business parks.

Years ago this option would not have been viable, said Colliers International in its Q1 2012 Shanghai Property Market Review, but the improving infrastructure and amenities in Shanghai business parks are attracting even top-tier firms with large space needs.

Here's more from Colliers: 

The steady decrease of available Grade A office supply in downtown Shanghai has led to growth in the pre-leasing rate of new buildings, as occupiers move to secure premises. The competition for downtown office space has also led large occupiers to seek suitable property beyond the traditional business districts where infrastructure and amenities have improved significantly in recent years.

Michael Wu, Director of Colliers Office Services Tenant Representation for East China commented, “Given the prevailing solid demand carried through from 2011, and the large areas now under offer in new buildings, it has become critical for occupiers to consider their future occupational needs now and make plans that will stabilize the cost of their Shanghai office accommodation in the mid to long term”.

Colliers anticipates increased Grade A office rental levels in Q2 2012 as high levels of pre-commitment reduces the availability of premium space in the downtown area.

Jonathan Rideout, Director of Colliers International Business Park team commented, “The increasing of the pre-leasing rate for new Grade A Office projects, as well as the limited new supply in downtown area, has forced large occupiers to look outside the traditional business districts. The recent shift of focus from core downtown areas to Shanghai’s Business Parks appears to be gaining momentum on the back of improved infrastructure, better property developments, good local amenities and cost effective leasing terms”.

In Q1 2012, Colliers witnessed strong market sentiment for Business Park premises with stable leasing demand and a marked increase in investment demand. The average rental rate was RMB 3.2 per square metre per day with a range observed by Colliers at between RMB 2.8 per square metre per day to RMB4.5 per square metre per day. Colliers noted deals being concluded in Q1 by major multinational tenants such as Hershey’s and Roche.

In the investment market, two noteworthy deals were observed by Colliers during this quarter, one in the modern service park of Caohejing Hi-tech Park, the other in Huamu area. The sales prices were recorded at RMB 25,516 and RMB 15,000 per square metre respectively. Colliers expects more MNC’s to relocate their R&D and back offices to business parks as a result of the growing occupational costs in the CBD area. To meet this demand, some developers such as Tishman Speyer are upgrading their business park projects to meet this trend.

Colliers anticipates increased rental levels in Q2 2012 at Shanghai’s Business Parks as high levels of pre-commitment reduce the availability of Grade A space in the downtown area and force larger occupiers to look outside the traditional business districts.