Shanghai Office Market Report - Q1 2020 During the COVID-19 pandemic, leasing and relocation activities dropped significantly but more renewals ...
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During the COVID-19 pandemic, leasing and relocation activities dropped significantly but more renewals occurred Shanghai Office knightfrank.com.cn Market Report Q1 2020
S hanghai O F F I C E M A R K E T R E P O R T Q 1 2 0 2 0 S hanghai O F F I C E M A R K E T R E P O R T Q 1 2 0 2 0 OVERVIEW AND OUTLO OK S U P P LY A N D D E M A N D Owing to the COVID-19 pandemic, there new supply launched onto the market pandemic, leading to softened demand in In Q1, there was no new projects launched in was no new project completed or delivered due to the current delays in office project the short term. The average vacancy rate the Shanghai office market. After our annual FIGURE 3: Grade-A office supply, net absorption and vacancy rate in the first quarter (Q1). It is expected that completions. Domestic import and export will continue to rise, while market rents will research basket adjustment, the inventory of the peak of supply will come in the next trade and related industries have been maintain a downward trend in the second Grade-A office space in Shanghai totalled over '000 sqm Supply (left) Net absorption (left) Vacancy Rate (right) twelve months, with no less than 2.2 million seriously affected by the global COVID-19 quarter of 2020. 19 million sqm. The inventory of Grade-A office 18% 3,000 space in Core CBDs (5.04 million sqm) and the emerging business districts (5.33 million sqm) 16% 2,500 accounted for approximately 54% of the total 14% FIGURE 1: Shanghai Grade-A office market indicators[1] figure. In 2020 nearly 500,000-sqm new office 2,000 space is expected to be launched in Xuhui 12% Binjiang. 1,500 10% In Q1, the average vacancy rate in Shanghai 8% 2020 q1 2020 Q1 2020 q1 Grade-A office market increased 0.6 1,000 New supply Rent Vacancy rate percentage point QoQ to 14%. Both weak 6% 500 - 14% market demand and the decrease of leasing sqm 9.0 activities were the important reasons for the slight increase in vacancy rates. It is worth 0 4% RMB/sqm/day 2% noting that the global spread of COVID-19 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 has led to a shrinking business volume and Q1 0% S o u rc e : K n i g h t F ra n k R e s e a rc h revenue of related companies in the trade, retail and manufacturing sectors. Companies will have to reduce their office space due to cost savings, and the average vacancy rate will increase significantly in the coming quarters. RENTS Given the weakening economy and the impact QoQ change: - QoQ change: 2.2% QoQ change: 0.6 pps of COVID-19, the average rent conintued to decline in Q1. The average rent of Grade-A FIGURE 4: Grade-A office rental trend RMB/sqm/day Outlook (Q2 2020) : Outlook (Q2 2020) : Outlook (Q2 2020) : office market decreased by 2.2% QoQ to RMB9.0 per sqm per day. 12 S o u rc e : K n i g h t F ra n k Re s e a rc h Rents in emerging and secondary business 10 [ 1 ] Re n t re fe r s to ave ra g e e f fe c t i ve re n t districts dropped significantly with a QoQ decrease of 5.6%. 8 The rent in the Core CBDs dropped slightly 6 to RMB11.1 per sqm per day. Many tenants chose to renew their leases upon expiry 4 FIGURE 2: Shanghai office development pipeline, 2019-2023 and landlords agreed on an unchanged or a downward rent, avoiding a sharp drop in 2 sqm South Jing’an rents in the Core CBDs. The average rents of 2,500,000 0 Pudong Nanjing West Road and Huaihai Middle Road Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 Xuhui remained at RMB10.9 and RMB9.9 per sqm 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Huangpu per day respectively. The average rent of Little 2,000,000 Lujiazui decreased slightly by 0.8% QoQ to S o u rc e : K n i g h t F ra n k R e s e a rc h Changning Putuo RMB11.9 per sqm per day. 1,500,000 Hongkou TABLE 1: Major Grade-A office leasing transactions, Q1 2020 North Jing’an More than 80% of the state-owned landlords provided two months rent relief from Feburary Area Minhang District Building Tenant Type 1,000,000 to March in 2020 to small and medium-sized (sqm) Yangpu companies, relieving their operating pressure Railway Station 1FS Atlas 4,800 New Lease due to the outbreak of COVID-19. 500,000 Xujiahui Ascendas Plaza International Paper 1,033 New Lease Nanjing West Road Plaza 66 Tower 2 Jixing Pharma 700 New Lease North Bund North Bund Plaza Galaxy Derivatives 1,503 New Lease 0 Qiantan New Bund Centre Veolia Water Technology 4,500 New Lease 2019 2020 2021 2022 2023 Little Lujiazui Ruiming Tower Jiahe Fund 2,400 New Lease S o u rc e : K n i g h t F ra n k Re s e a rc h S o u rc e : K n i g h t F ra n k R e s e a rc h N o t e : a l l t ra n s a c t i o n s a re s u b j e c t t o c o n f i r m a t i o n 2 3
S hanghai O F F I C E M A R K E T R E P O R T Q 1 2 0 2 0 INVESTMENT MARKET In Q1 2020, the Shanghai property Management. Located in Pudong New Area, several wholly-owned subsidiaries of The9 investment market recorded four office en- Shanghai HNA Tower has a total gross floor Limited in China which collectively owned bloc sales for a total investment amount area of 87,395 sqm. HNA Group holds office Zhangjiang Micro-Electronic Port Block of RMB3.5 billion. The major buyers are floors from level 1 to 5 and level 12 to 20 as Three for RMB493 million. Located in the investment funds, insurance funds and well as the whole retail portion of 5,895 sqm. core area of Zhangjiang Hi-Tech Park, the developers. four-storey R&D office building has a total In Feburuary, Keppel Land China Limited gross floor area of approximately 14,518 sqm. In January, HNA Group sold Shanghai has entered into an equity transfer HNA Tower Project to China Cinda Asset agreement to acquire 100% equity in S h ang h ai offi c e market das h board (2020 Q1) Shanghai office inventory, rents and vacancy rates of major business districts Hongqiao CBD Zhongshan Park Nanjing West Road Railway Station People’s Square The Bund North Bund Inventory: 1,348 Inventory: 409 Inventory: 1,308 Inventory: 500 Inventory: 887 Inventory: 485 Inventory: 631 Rent: 7.4 Rent: 7.2 Rent: 10.9 Rent: 6.5 Rent: 8.5 Rent: 8.9 Rent: 8.0 VR: 22.9% VR: 2.9% VR: 6.1% VR: 30.9% VR: 5.0% VR: 16.4% VR: 37.7% Core CBD CBD Secondary business district Emerging business district Total Inventory 19.09 million sqm New Honqiao Xujiahui Xuhui Binjiang Qiantan Huaihai Middle Road Little Lujiazui Century Avenue Inventory: 1,211 Inventory: 494 Inventory: 223 Inventory: 600 Inventory: 953 Inventory: 2,787 Inventory: 943 Rent: 7.4 Rent: 7.6 Rent: 6.6 Rent: 6.4 Rent: 9.9 Rent: 11.9 Rent: 8.6 VR: 22.2% VR: 3.4% VR: 1.4% VR: 35.1% VR: 4.3% VR: 7.3% VR: 14.7% S o u rc e : K n i g h t F ra n k Re s e a rc h N ote : u n i t fo r m a r ke t i n ve n t o r y – 1 ,0 0 0 s q m ; re n t s u s i n g a ve ra g e e f fe c t i ve re n t a t R M B /s q m /d a y ; V R re fe r s t o a ve ra g e va c a n c y ra t e. 4
We like questions, if you’ve got one about our research, or would like some property advice, we would love to hear from you. Research & Consultancy Shanghai Office Services Timothy Chen Regina Yang Peter Zhang Senior Director, Strategic Advisory, Director, Head of Research & Consultancy, Senior Director, Head of Office Services, China Shanghai & Beijing Shanghai +86 21 6032 1769 +86 21 6032 1728 +86 21 6032 1713 timothy.chen@cn.knightfrank.com regina.yang@cn.knightfrank.com peter.zhang@cn.knightfrank.com Martin Wong Mars Yin Associate Director, Senior Manager Research & Consultancy, Greater China Research & Consultancy +852 2846 7184 +86 21 6032 1730 martin.wong@hk.knightfrank.com mars.yin@cn.knightfrank.com R E C E N T M A R K E T - L E A D I N G R E S E A R C H P U B L I C AT I O N S Supportive policies Greater Bay Area Beijing Office Shanghai Office Guangzhou Office Shenzhen Office for businesses in Retail Repot Market Report Market Report Market Report Market Report China during Q1 2020 Q4 2019 Q1 2020 Q4 2019 COVID-19 Knight Frank Research Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions Reports are available at and the public sector. All our clients recognise the need for expert independent advice customised to their specific needs. Important Notice: ©Knight Frank 2020: This document and the material contained in knightfrank.com.cn it is general information only and is subject to change without notice. All images are for illustration only. No representations or warranties of any nature whatsoever are given, intended or implied. Knight Frank will not be liable for negligence, or for any direct or indirect consequential losses or damages arising from the use of this information. You should satisfy yourself about the completeness or accuracy of any information or materials and seek professional advice in regard to all the information contained herein. This document and the material contained in it is the property of Knight Frank and is given to you on the understanding that such material and the ideas, concepts and proposals expressed in it are the intellectual property of Knight Frank and protected by copyright. It is understood that you may not use this material or any part of it for any reason other than the evaluation of the document unless we have entered into a further agreement for its use. This document is provided to you in confidence on the understanding it is not disclosed to anyone other than to your employees who need to evaluate it.members’ names.
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