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
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COVID-19
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