Shanghai Property Market 2017 Review and 2018 Outlook - Shanghai Property Market | East China January 23, 2018 - Colliers ...
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Colliers Outlook Shanghai Property Market | East China January 23, 2018 Shanghai Property Market 2017 Review and 2018 Outlook
Timothy Chen Executive Summary
Director | Research | East China Driven by economic growth, Shanghai’s property market
had a robust year in 2017, with strong net absorption for all
timothy.chen@colliers.com sectors. Despite firm demand, the office, business park and
retail sectors all saw vacancy climb slightly as supply was
also heavy during the year. Due to a demand spike and
Driven by economic growth, Shanghai’s property restricted land supply, logistics properties in Shanghai and
market had a robust year in 2017, with strong net adjacent cities became particularly scarce, triggering
absorption for all sectors. Despite firm demand, the several major investment deals during the second half of
office, business park and retail sectors all saw the year.
vacancy climb slightly as supply was also heavy Looking forward, the outlook for economic growth in Asia
during the year. Due to a demand spike and restricted remains bright in 2018 and real interest rates should remain
land supply, logistics properties in Shanghai and low. China, Japan, South Korea, Hong Kong and Singapore
should all achieve higher or sharply higher growth in real
adjacent cities became particularly scarce, triggering GDP for 2017 than for 2016, although modest slowdowns
several major investment deals during the second half look probable for 2018. Monetary conditions in many Asian
of the year. countries are currently so loose that we expect the pace of
monetary tightening over 2018-2019 to have only a very
Looking forward, the outlook for economic growth in moderate impact on property markets. With overall demand
Asia remains bright in 2018 and real interest rates set to stay strong, Shanghai's property market should
should remain low. China, Japan, South Korea, Hong remain generally optimistic in 2018.
Kong and Singapore should all achieve higher or ➢ Outlook for office rents
sharply higher growth in real GDP for 2017 than for “As China pushes to open its financial sector,
2016, although modest slowdowns look probable for Shanghai should continue attracting foreign and
2018. Monetary conditions in many Asian countries domestic finance institutions, which in turn should
are currently so loose that we expect the pace of underpin office demand in its CBDs over the next three
to five years. In the meantime, Shanghai’s technology
monetary tightening over 2018-2019 to have only a sector is expanding rapidly and will be a firm demand
very moderate impact on property markets. With source in the Grade A office market. On top of industry
overall demand set to stay strong, Shanghai's growth, we expect the city’s large sum of new supply
property market should remain generally optimistic in and the improving amenities (including metro line
2018. network) to stimulate demand, including upgrade
needs…. Additional space will keep the vacancy rate of
We expect in 2018: Shanghai’s CBD market around 15% in 2018 despite
the ongoing absorption. [However] Colliers predicts the
1. Property capital values and rents to rise further in average rent for the CBD market will remain flat by
the business park sector, while vacancy rates 2018 year-end.”
should stay low. ➢ Outlook for retail rents
2. Vacancy rates will fall and rents will rise in prime “In 2018, only three new projects are scheduled in the
logistics properties in Shanghai, with demand prime market, and the vacancy rate will remain low and
rent growth will be steady. In the non-prime market, the
increasingly spilling over to cities further out. influx of new supply will lead to a rise in vacancy and a
3. In the office market, heavy new supply has decline in rent.”
pushed up the vacancy rates in Shanghai’s CBDs We expect property capital values and rents to rise further
and put pressure on rents in certain districts. in the business park sector, while vacancy rates should stay
low. Given firm demand for logistics space and very limited
However, the outlook for leasing demand from
land supply, we think that vacancy rates will fall and rents
financial companies, technology companies and will rise in 2018 and over the next few years in prime
expanding flexible workspace operators is strong, logistics properties in Shanghai, with demand increasingly
and so we predict flat rent on average. spilling over to cities further out. In the office market, heavy
new supply has pushed up the vacancy rates in Shanghai’s
4. In the retail market, international brands have CBDs and put pressure on rents in certain districts.
stimulated demand and helped to counter the However, the outlook for leasing demand from financial
companies, technology companies and expanding flexible
impact of rising supply, which is concentrated in
workspace operators is strong, and so we predict flat rent
the non-prime areas. For 2018, we predict low on average in the CBDs over 2018. In the retail market,
vacancy and steady rent growth in the prime international brands have stimulated demand and helped to
areas, although the influx of new supply should counter the impact of rising supply, which is concentrated in
lead to a rise in vacancy and a decline in rent in the non-prime areas. For 2018, we predict low vacancy and
steady rent growth in the prime areas, although the influx of
the non-prime areas. new supply should lead to a rise in vacancy and a decline in
rent in the non-prime areas.
Table of Content
Executive Summary ...................................... 2
Economic fundamentals remained robust in
2017 ................................................................ 4
Firm economic growth and persistent low
real interest rates will continue to drive
occupier and investment property markets
in Asia in 2018 ............................................... 5
CBD Grade A Office: Heavy supply and
strong absorption .......................................... 6
Business Park: Active Market Accelerates
Rent Growth ................................................... 8
Retail: A Record High New Supply,
International Brand Stimulated Demand ... 10
Industrial: Strong Demand and Active
Investment Market ....................................... 11
3 Shanghai Property Market 2017 Review and 2018 Outlook | Jan 2018 | Shanghai Property Market |
East China | Colliers InternationalFigure 3: Growth Rate of Shanghai’s Major
Economic fundamentals Tertiary Industries Added Value (first three
remained robust in 2017 quarters of 2017)
Shanghai's overall economy grew at a steady pace in
2017. As of the first three quarters of 2017, Shanghai Information transmission,
achieved a real GDP growth rate of 7.0% to RMB2.16 software and information 13.7%
trillion (USD332.2 billion), while the added value of the technology services
tertiary industry reached RMB1.49 trillion (USD 229.0
Finance 11.0%
billion) over the same period, an increase of 6.6% on a
yearly basis. The tertiary industry accounted for 69% of
Transportation, warehousing
GDP as of Q3. Information transmission, software and 11.6%
and postal service
information technology services, financial services, as
well as transportation, warehousing and postal services
Wholesale and retail 6.2%
have shown significant growth rates, which provided a
firm foundation for demand of office buildings, business
parks, and logistics properties in Shanghai. Hotels and catering services 2.6%
Figure 1: Shanghai GDP and Growth Rate
Source：Shanghai Statistics Bureau
(2006-2017Q3)
RMB billion
3,000 14% In 2017, the total retail sales of consumer goods in
2,500 12% Shanghai reached RMB791.2 billion (USD121.6 billion)
2,000 10% as of the first nine months, maintaining a steady growth
1,500
8% of around 8%. Per capita disposable income and per
6% capita consumption expenditure in Shanghai increased
1,000 4% by 8.5% and 6.2% respectively over the same period.
500 2% The robust growth of consumer demand supported retail
0 0%
businesses, which in turn brought expansion
opportunities in retail properties.
Gross Domestic Product GDP Growth Rate Figure 4：Shanghai’s Total Retail Sales of
Consumer Goods and Growth Rate (2006-
Source：Shanghai Statistics Bureau
2017Q3)
RMB billion
Figure 2: Shanghai Tertiary Industry Added 1,200 20%
Value and GDP Share (2006-2017Q3) 1,000
18%
16%
RMB billion 800 14%
12%
2,500 80%
600 10%
70% 8%
2,000 400
60% 6%
1,500 50% 200 4%
40% 2%
1,000 0 0%
30%
20%
500
10%
0 0%
Total Retail Sale Growth Rate
Source：Shanghai Statistics Bureau
Tertiary Industry Added Value Percentage
Source：Shanghai Statistics Bureau
4 Shanghai Property Market 2017 Review and 2018 Outlook | Jan 2018 | Shanghai Property Market |
East China | Colliers InternationalFigure 5：Shanghai’s Per Capita Figure 7：Shanghai’s Total Retail Sales,
Disposable Income, Per Capita Online Retail Sales and Its Share (2007-
Consumption Expenditure and Growth 2017Q3)
Rates (2007-2017Q3) 15000 50%
RMB
80,000 40% 10000 30%
70,000 35%
60,000 30% 5000 10%
50,000 25%
0 -10%
40,000 20% 2012 2013 2014 2015 2016 As of
30,000 15% 3Q17
Retail total value
20,000 10% Online retail total value
10,000 5% % of Online Retail Sales to Total Retail Sales
0 0%
Source：Shanghai Statistics Bureau
Per Capita Consumption Per Capita Disposable
Expenditure
Per Capita Consumption Income
Per Capita Disposable Income Firm economic growth and
Growth Growth
Source：Shanghai Statistics Bureau persistent low real interest
As of Q3 2017, the total volume of cargo transportation
in Shanghai has shown a strong rebound from the first
rates will continue to drive
nine months of 2016, with a growth rate of 10.6%. This
has fundamentally supported the logistics property
occupier and investment
market in Shanghai and nearby cities. Meanwhile,
Shanghai’s online retail sales and its share of total retail
property markets in Asia in
sales continued their rapid growth, significantly
contributing to the demand for modern logistics
2018
Economic conditions have strengthened around the
properties.
world: 2017 will see the highest global real GDP growth
since 2010, and 2018 should be better still. In Asia,
Figure 6: Shanghai’s Volume of China, Japan, South Korea, Hong Kong and Singapore
Transportation and Growth Rate (2006- should all achieve higher or sharply higher growth in
20173Q) 2017 than in 2016, although modest slowdowns look
billion tons probable for 2018. Momentum in India slowed in H1
100,000 18% 2017, and so growth will be below China’s for that year;
however, growth should rebound sharply in 2018.
80,000 12%
Improved economic conditions have boosted demand for
60,000 6% leased office space, especially in Hong Kong but also in
Singapore, the leading Chinese cities and in India.
40,000 0%
Demand for industrial and logistics property has
20,000 -6% strengthened for similar reasons. With overall demand
for leased office and warehouse property set to stay
0 -12%
strong, office and warehouse rents should rise further or
at least stay reasonably stable, boosting cash rental
streams to landlords and thereby supporting investment
Freight Traffic Change YOY
property demand.
Source：China Logistics Information Centre US interest rates are clearly set to rise gradually from
now on, putting upward pressure on benchmark interest
rates in Asia. Nevertheless, monetary conditions in many
Asian countries are currently so loose that that we
expect the pace of monetary tightening over 2018-2019
to have only a very moderate impact on property
markets. We think that Hong Kong will continue to enjoy
5 Shanghai Property Market 2017 Review and 2018 Outlook | Jan 2018 | Shanghai Property Market |
East China | Colliers Internationalnegative real (i.e. inflation-adjusted) interest rates until CBD market by 15.8% YOY to approximately 7.08 million
late 2019 or early 2020, and with inflation likely to move sq m (76.2 million sq ft) in 2017.
gradually upwards in Singapore, Japan, India and China
real interest rates ought to stay low and perhaps even A total of 599,000 sq m (64.5 million sq ft) of net
fall in those markets too. Persistent low real interest absorption was recorded in Shanghai’s CBDs in 2017,
rates should naturally ensure that funding costs remain the strongest absorption level in the past six years.
low for property developers and investors. However, the average vacancy rate in Shanghai’s CBDs
was pushed up by the hefty sum of new supply to 13.9%
at end-2017, up 3.7 percentage points YOY. By area, the
CBD Grade A Office: Heavy average vacancy rate in Puxi increased by 2.8
percentage points YOY to 14.3%, while the same figure
supply and strong in Pudong increased by 5.0 percentage points YOY to
13.2%.
absorption Figure 8: Shanghai CBD Grade A Office
The Shanghai CBD Grade A office market was strong on
both the supply and demand sides in 2017. According to New Supply, Net Absorption and Vacancy
the Shanghai Statistics Bureau, Shanghai’s GDP and Rate (2017)
tertiary industry expanded by 7.0% and 6.6% YOY
respectively in the first three quarters of 2017, supporting Others, 7%
firm demand for the city’s quality office space. Although Co-working, 2%
the net absorption was promisingly strong, the market Medical & Health, 4%
received an influx of new completions, resulting in a
Property, 4%
continued increase in average vacancy and decline in Finance, 31%
rent amidst increasing competition in the CBDs. The Fashion, 5%
office investment market continued to be active
throughout the year, reflected in 39 sales transactions
(including mix-used projects) totalling RMB 67.8 billion Trading, 7%
(USD 10.45 billion).
The Shanghai CBD office market received twelve new Manufacturing, 8%
office projects totalling a record high 956,000 sq m (10.3
Technology, Professional
million sq ft) of office GFA during 2017, including China Service, 22%
12%
Life Finance Centre and skyscraper Shanghai Tower in
Lujiazui, Century Link Tower 2 in Zhuyuan, HKRI Centre
Tower 2 in Jing’an’s Nanjing West Road, and China
Oversea International Centre south of Xintiandi in
Source：Colliers International Research
Huangpu. This drove up the total stock of the Shanghai
Figure 8: Shanghai CBD Grade A Office New Supply, Net Absorption and Vacancy Rate
(2008-2017)
1,200 20%
000' sq m
18%
1,000
16%
14%
800
12%
600 10%
8%
400
6%
4%
200
2%
0 0%
2015
2008
2009
2010
2011
2012
2013
2014
2016
2017
New Supply Net Absorption Vacancy Rate
Source：Colliers International Research
6 Shanghai Property Market 2017 Review and 2018 Outlook | Jan 2018 | Shanghai Property Market |
East China | Colliers InternationalThe finance and professional sectors are still the main
sources of Grade A leasing demand, accounting for 53% Figure 11: Average rents and growth of
of the total number of transactions. Technology, Shanghai CBD Grade A office market (2008-
manufacturing and trading enterprises accounted for
12%, 8% and 7% respectively. Starting in 2017, foreign
2017)
12 20%
RMB psm per day
and domestic flexible workspace operators including
10
WeWork and Distrii, started tackling Shanghai’s Grade A 10%
and Premium office market in the CBDs. Backed by 8
strong investment, the major players have signed 6 0%
numerous large leases of entire buildings or multiple 4
-10%
floors with Grade A building landlords in various core 2
clusters. Colliers predicts the leading operators will 0 -20%
continue absorbing available space in CBDs in 2018.
2015
2008
2009
2010
2011
2012
2013
2014
2016
2017
Average Rent Growth YOY
Figure 10: Major leasing transactions in
Shanghai CBD’s Grade A office buildings Source: Colliers International Research
(2017)
TENANT Figure 12: Grade A office rents Shanghai
TENANT AREA
NAME (EN)
NAME
(SQM)
BUILDING DISTRICT CBD by submarkets (2017Q4)
(CN)
RMB psm per day
14
Gopher Average Rent: RMB
PepsiCo 百事公司 8,000 Huangpu 10.21psm per day
Centre 12
10
DJS18.com 大金所 8,000 China Life Pudong
8
Bank of
杭州银行 13,000 BFC N2 Huangpu 6
Hangzhou
4 10.75
12.50
中国人民 Century Link
9.22
9.52
7.34
9.01
PICC 9,000 Zhuyuan 2
保险 - Tower 1
0
Changjiang Century Link Huangpu Jing'an Lujiazui Zhuyuan Changning Xuhui
长江证券 10,000 Pudong
Securities - Tower 1
Source: Colliers International Research
Yum China 百胜中国 13,000 T20 Xuhui
晋思建筑 One
Gensler 5,200 Museum Jing'an The investment sentiment for Shanghai’s office
事务所
Place properties remained strong in 2017. Thirty-nine deals
totalling RMB67.6 billion (USD10.4 billion) were
China
Oversea disclosed during the year. Foreign funds, domestic
WeWork WeWork 28,000 International Huangpu institutions, and RMB funds were all actively sourcing
Centre
Tower B
income-producing targets, and high quality office assets
with value-add and/or upside potential continued to
attract investors.
Source: Office Service, Colliers International
As China pushes to open its financial sector, Shanghai
The rising vacancy rate and the new supply scheduled should continue attracting foreign and domestic finance
for 2018 continued to place pressure on landlords. Some institutions, which in turn should underpin office demand
of them responded by lowering their rental expectations in its CBDs over the next three to five years. In the
to compete for and/or retain tenants, resulting in a rental meantime, Shanghai’s technology sector is expanding
correction in 2017. At end-2017, the average rent in rapidly and will be a firm demand source in the Grade A
Shanghai’s CBDs declined by 2.4% on a yearly basis to office market. On top of industry growth, we expect the
RMB10.21 (USD 1.57) psm per day. By area, the city’s large sum of new supply and the improving
average rent in Puxi declined by 3.6% YOY to RMB9.14 amenities (including metro line network) to stimulate
(USD 1.41) psm per day while the average rent in demand, including upgrade needs, for quality office
Pudong declined by 1.1% YOY to RMB11.79 (USD 1.82) properties. In 2018, an additional 559,000 sq m (6.02
psm per day. Among the six submarkets, Lujiazui million sq ft) of office GFA in the CBDs is scheduled to
recorded the highest average rent of RMB12.5 (USD be completed. The city’s emerging clusters including The
1.92) psm per day. New Bund, Hongqiao CBD, Xuhui Riverfront and Zhenru
7 Shanghai Property Market 2017 Review and 2018 Outlook | Jan 2018 | Shanghai Property Market |
East China | Colliers Internationalwill also receive a large number of new completions by IT and internet service are the main demand drivers for
the end of 2018. This additional space will keep the new set ups and expansion, evidenced by Wanda
vacancy rate of Shanghai’s CBD market around 15% in Network consolidating its Shanghai offices and leasing
2018 despite the ongoing absorption. Colliers predicts approximately 40,000 sq m at two en bloc buildings at
the average rent for the CBD market will remain flat by Shanghai International Trade Centre (SITC) and
2018 year-end. Huawei’s expansion of 7,600 sq m at A-Reit in Jinqiao.
The telecoms technology company Huaqin expanded by
15,640 sq m at Innovation Park for its headquarters,
Hella leased 6,000 sq m at Haiqu Park and 360 Network
leased 5,000 sq m at Innov Star; Macroflag Marketing
Business Park: Active service leased 3,200 sq m at E-Park Phase I as its
headquarters and Hikvision leased 3,500 sq m at Capital
Market Accelerates Rent of Leaders in Zhangjiang. High-tech company Partner
X’s leased a 7,000 sq m en bloc building at Shanghai
Growth Business Park Phase III-5 in Caohejing.
The strong growth in tertiary industry, especially
information transmission, software and information Twenty new projects with a combined effective supply of
technology services sectors which increased 13.7% YOY 985,000 sq m (10.6 million sq ft) were launched in 2017,
in the first three quarters of 2017, underpinned solid the highest level since 2007. Accordingly, the total stock
demand in Shanghai’s business park property market in of Shanghai’s business park property market reached
2017. Echoing these positive economic indicators, the nearly 9.05 million sq m (97.4 million sq ft) as of end-
business park market was active, with a surge in net 2017, up 12.0% YOY. Over half of the new supply was
absorption and only a trivial increase in the overall handed over in the second half of the year, and is still
vacancy rate despite 20 new completions. The average being absorbed. By GFA, Zhangjiang accounted for 64%
rent continued to see upward momentum with of the total new supply. Accordingly, the average
improvements in infrastructure and high-quality projects. vacancy rate increased 0.5 percentage points YOY to
16.1% as of end-2017.
The overall leasing demand was very strong in 2017,
and net absorption increased 150% YOY to 780,000 sq Echoing the strong demand, rental performance
m (8.4 million sq ft), doubling 2016’s figure. The pickup continued to see upward momentum. The city’s average
in leasing activities was underpinned by increasingly rent increased by 3.7% YOY to RMB4.18 psm (USD
convenient transport connections, improved building 0.64) per day as of end-2017. Rental growth was
specifications and business atmosphere. The improved primarily supported by the above average rents of new
building quality and options for large spaces attracted projects and rental increases in projects with a stable
existing tenants to consolidate their offices and upgrade tenant mix and high occupancy rates. By submarket,
to new facilities as headquarters, R&D centres and back Caohejing Pujiang achieved the highest rental growth
offices. Companies from high-tech industries, especially
Figure 14: Shanghai Business Park New Supply, Net Absorption and Vacancy Rate（2006-
2017）
thousand sq m
1200 35%
1000 30%
25%
800
20%
600
15%
400
10%
200 5%
0 0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
New Supply Net Absorption Vacancy Rate
Source: Colliers International Research
8 Shanghai Property Market 2017 Review and 2018 Outlook | Jan 2018 | Shanghai Property Market |
East China | Colliers International(13.2%), followed by Zhabei (6.3%) and Caohejing business parks such as Zhangjiang middle zone and
(6.1%). Pujiang. We expect that these positive market
fundamentals and improvements in business
Figure 15: Shanghai Business Park Average atmosphere will stimulate demand for nearby properties.
Rent and Growth Rate（2006-2017）
In August, Shanghai’s municipal government approved
RMB psm
per day the “Construction Plan of Zhangjiang Science City”. The
4.5 25% plan mentioned the importance of Zhangjiang High-tech
4.0 20% Park as part of a national strategy to build Zhangjiang
3.5 15% Comprehensive National Scientific Centre, encouraging
3.0
10% the integrated development of the city and industries.
2.5
5% The upgrades of the amenities including infrastructure
2.0
0% and the planned residential houses near business parks
1.5
1.0 -5% will benefit both landlords and tenants in the long term.
0.5 -10%
0.0 -15% Approximately 800,000 sq m (8.6 million sq ft) of new
supply is scheduled to complete in Shanghai’s business
park real estate market in 2018. Nearly 68% of the new
Average Rent Growth Rate YOY
supply will be located in Zhangjiang, Caohejing and
Jinqiao, where demand is historically strong. We expect
Source: Colliers International Research
the average vacancy rate will decrease, given the
healthy absorption level and the high specifications of
Figure 16: Shanghai Business Park Average new projects. Looking forward, we expect that the
Rent by Submarket（2017Q4） average rent of Shanghai’s business park market will
RMB psm per day
maintain its buoyant momentum though the large volume
8.0 of supply in 2018 may limit the pace of growth.
7.0
6.0
Average Rent:
5.0 RMB 4.18psm per day
4.0
3.0
2.0
1.0
0.0
Average rent
Source: Colliers International Research
The business park investment market was active
throughout 2017, with the completion of 11 major
transactions totalling RMB17.4 billion (USD2.6 billion).
Foreign funds, domestic institutions, RMB funds and
end-users were the most active investors. They were
keen on projects with steady income streams or value-
add projects with the potential for renovation, mainly in
Zhangjiang, Jinqiao and Caohejing.
We expect the increasingly convenient metro
connectivity to continue in 2018. Line 9 Phase 3, which
extends to Jinqiao, was completed at the end of
December. Line 13 Phase 3 and Pujiang line are
scheduled to complete in 2018 and pass through
9 Shanghai Property Market 2017 Review and 2018 Outlook | Jan 2018 | Shanghai Property Market |
East China | Colliers InternationalHKRI Taikoo Hui. Experiential consumption was the
Retail: A Record High New shopping trend of 2017. The bookstore/café brand,
Yanjiyou, IP brand Line Friends and sportswear brand
Supply, International Brand Air Jordan all expanded with new experiential stores in
2017.
Stimulated Demand
Shanghai’s retail property market remained very firm in The average rent (excluding new supply) increased by
2017. Thirteen new projects opened, with 1.4 million sq 4.8% YOY in the prime market to RMB 58.7 (USD 9.0)
m (15.1 million sq ft) of new stock was released to the psm per day and 1.4% YOY in non-prime market to RMB
market. Decentralization continued to be the trend in 29.7 (USD 4.6) psm per day. Including new supply,
2017. Ten of the 13 new projects, accounting for 86% of average rent declined 8.7% YOY to RMB 34.1 (USD 5.2)
new supply in terms of GFA, were in non-prime areas psm per day.
such as Minhang and Changning district. By the end of
2017, the citywide total retail stock rose to 6.61 million Figure 18: Shanghai Retail Average Rent
sq. m. (71.2 million sq ft), and non-prime market and Growth Rate（2000-2017）
accounted for 75% of the city’s total retail stock.
RMB psm
In spite of the large amount of new supply, demand for per day
45 30%
new properties was strong, and the majority of the new
40 25%
supply achieved 80% or above occupancy rates by the 35 20%
end of 2017. Net absorption spiked to 1.28 million sq m 30 15%
(13.8 million sq ft) which is more than twice the 2016 25 10%
level. The city’s vacancy rate recorded a growth of 0.5 20 5%
15 0%
percentage points YOY to 12.6% by the end of 2017.
10 -5%
Excluding new supply, the vacancy rate edged down by 5 -10%
0.1 percentage point YOY to 10.8%. 0 -15%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Figure 17: Shanghai Retail New Supply, Net
Average Rent Growth YOY
Absorption and Vacancy Rate（2000-2017）
'000 sqm Source: Colliers International Research
1,400 35%
1,200 30% Figure 19: Shanghai Retail Average Rent
1,000 25% and Vacancy Rate by Catchment
800 20%
RMB psm
600 15%
70 per day
400 10% 60
200 5% 50
40
0 0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
30
20
New Supply Net Absorption Vacancy Rate 10
Source: Colliers International Research 0
Wujiaochang
Huamu
Zhongshan Park
Jinqiao
Dapuqiao
East Nanjing Rd
Lujiazui
Suhewan
West Nanjing Rd
North Sichuan Rd
Lianyang
Xujiahui
Huaihai Rd & Xintiandi
Xinzhuang
The F&B sector continued to contribute to the strong
demand during 2017. The well-known New York pastry
outlet, Lady M, has opened two outlets in IFC and
Xintiandi respectively. Furthermore, Starbucks opened Average Rent
its second Starbucks Reserve Roastery in HKRI Taikoo Prime Area Non-Prime Area
Hui after Seattle, occupying 2,700 sq m (29,065 sq ft).
The cosmetics sector was also active. The American
Source: Colliers International Research
cosmetics brand NARS chose Raffles City for its first
China outlet. Meanwhile, the French cologne brand, The retail property market will continue to be active in
Atelier Cologne, set up its first China flagship store at the coming year. More than 1.3 million sq m (13.99
10 Shanghai Property Market 2017 Review and 2018 Outlook | Jan 2018 | Shanghai Property Market |
East China | Colliers Internationalmillion sq ft) of new retail property at 16 different projects a large amount of demand spilled over to surrounding
is scheduled for 2018, including landmarks projects cities.
L+Mall by Luijiazui Properties and Century Link. More
than 1 million sq m of new supply will be released in the Figure 20: Shanghai Industrial New Supply,
non-prime market. Net Absorption and Vacancy Rate (2008-
2017)
In 2018, only three new projects are scheduled in the
prime market, and the vacancy rate will remain low and '000 Sqm
rent growth will be steady. In the non-prime market, the 800 25%
influx of new supply will lead to a rise in vacancy and a 700
decline in rent. 600
20%
500
15%
Industrial: Strong Demand 400
300 10%
and Active Investment 200
100
5%
Market 0
0%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
-100
China’s industrial economy showed steady growth as of
-200 -5%
Q3 2017, with both official and Caixin manufacturing PMI
showing growth. The total industrial output value rose by New Supply Net Absorption Vacancy Rate
9.4% YOY. In terms of trading, both total import volume
and total export volume showed a rapid growth trend Source: Colliers International Research
over the first three quarters of 2017, with the total export
value increasing 10.5% YOY, while the total import value Strong demand and limited vacant space resulted in fast
increased 21.2% YOY. Strong demand from logistics rental growth. The average rent of Shanghai’s prime
and related industries continued to support the logistics logistics property increased by 7.2% from 2016 to
properties market in Shanghai RMB1.39 psm (USD 0.21) per day, accelerating by 2.8
percentage points. Many properties achieved rental
Only two prime non-bonded logistics developments with growth as limited available leasing space gave landlords
a total GFA of 135,000 sq m (1.45 million sq ft) were very strong negotiation power. Average rent of non-
completed in 2017, the lowest annual supply since 2008. bonded and bonded logistics property increased by 9.1%
Total stock of Shanghai’s prime logistics properties and 5.7% respectively. By submarket, rent in Baoshan,
expanded to 6.96 million sq m (74.9 million sq ft). Jinshan and Songjiang rose significantly, or more than
Pudong district now accounts for 65% of total stock. 10%.
Despite the completion of new projects, Shanghai’s
logistics properties remained in short supply. Figure 21: Shanghai Industrial Average
Rent and Growth Rate (2009-2017)
Despite only two new completions, demand for prime
logistics property remained strong, with net absorption of
RMB psm per day
581,000 sq m (6.25 million sq ft). As of end of the year,
1.60 8%
the vacancy rent dropped by 6.6 percentage points YOY
to 6.4%. In the non-bonded logistics property market, 1.40 7%
strong demand from e-commerce, third party logistics 1.20 6%
and manufacturing led to a decline in the vacancy rate of 1.00 5%
9.1 percentage points YOY to 5.8%. At the same time,
0.80 4%
demand from cross-border e-commerce for bonded
logistics property kept increasing, and the vacancy rate 0.60 3%
fell by 3.7 percentage points YOY to 7.1%. Rapid growth 0.40 2%
in e-commerce and the launch of a variety of online 0.20 1%
shopping festivals also increased demand for logistics
- 0%
property. Due to the rectification of illegally constructed 2009 2010 2011 2012 2013 2014 2015 2016 2017
facilities in Shanghai in this year, demolition of illegally
constructed workshops and warehouses has been Average Rent Change YOY
ongoing. This has pushed many tenants towards new
high-quality logistics property and created additional
demand for storage space. Due to limited vacant space, Source: Colliers International Research
11 Shanghai Property Market 2017 Review and 2018 Outlook | Jan 2018 | Shanghai Property Market |
East China | Colliers InternationalFigure 22: Average Rent and Growth Rate
by Submarket (2017Q4)
RMB psm per day
1.80 18%
1.60 16%
1.40 14%
1.20 12%
1.00 10%
0.80 8%
0.60 6%
0.40 4%
0.20 2%
0.00 0%
Average Rent Change YOY
Source: Colliers International Research
Shanghai’s investment market in logistics property was
active in 2017, with both domestic and foreign investors
showing optimism. The net yield declined to about 5.0%
by year-end although this was still higher than for other
property market segments. At the same time, traditional
developers started to show interest in logistics property.
They set up investment funds for logistics property and
were active in the investment market. At the same time,
industrial land supply in 2017 decreased by 4.7%, with
total 2.19 million sq m (23.57 million sq ft) and only one
logistics land site.
In July 2017, Nesta Investment Holdings Limited and
GLP jointly announced that a Chinese private equity
consortium comprising the Vanke Group, Hopu
Investment Management, the Hillhouse Capital Group,
SMG and the Bank of China Group Investment had
acquired GLP for a total of approximately USD11.6
billion, one of Asia’s largest private equity acquisitions. In
September, Invesco acquired a majority stake of a
portfolio of high-quality logistics property from ESR,
paying more than RMB2.0 billion (USD310 million) in the
transaction.
Over 800,000 sq m (8.61 million sq ft) of non-bonded
logistics property is scheduled to be completed in 2018,
with half in Pudong Area. As a result, Colliers expects
the vacancy rate will increase in the 8%-9% range, while
average rent will continue to grow at a rate of 5%-7%.
12 Shanghai Property Market 2017 Review and 2018 Outlook | Jan 2018 | Shanghai Property Market |
East China | Colliers InternationalFor more information:
396 offices in Tammy Tang
Managing Director
Executive Director | Industrial Services | China
68 countries on +86 28 8658 6288
tammy.tang@colliers.com
6 continents
Primary Authors:
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Timothy Chen
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Director | Research | East China
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Hebe Lau
$2.6 Manager | Research | East China
billion in
annual revenue
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Manager | Research | East China
2.0
billion sq feet Amanda Guan
under management
Analyst | Research | East China
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professionals Analyst | Research | East China
and staff
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