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According to Jones Lang LaSalle’s research series on the Shanghai office market
Decentralised Grade A tenants will enjoy lower rental costs in addition to accessibility. On average, decentralised space is currently 31% cheaper than CBD space, and it will continue to offer a substantial discount for tenants in the years to come. Between 2010 and 2011, Jones Lang LaSalle foresees this gap to widen further to around 50% (see Figure 2). Cost-sensitive tenants will also recognise that today’s relatively low CBD rents can’t persist forever, and view decentralised office as a solid long-term strategy. The rental cycles of decentralised office and the CBD are expected to move in synchrony with a slight time lag. A recovery in decentralised rents will likely lag a recovery in the CBD. Currently 54% of occupancy in decentralised Grade A buildings consists of former CBD tenants. To date, an estimated 110,000 sqm of take-up in decentralised buildings was driven by former CBD tenants. Of that total, 74,000 sqm was driven by former CBD Grade A tenants. “Mature markets around the world show clear consistency in terms of industry sectors among CBD Grade A tenants, which are predominantly in the financial, legal and professional services industries. Decentralised Grade A space is the most common choice for tenants in the manufacturing, technology and other industries that do not require a high-profile office location. Shanghai is now moving in this direction. Grade A buildings in Shanghai’s CBD still include tenants that would traditionally choose decentralised space in mature markets. Going forward, these tenants will be a major source of demand for space in new decentralised Grade A buildings,” added Mr. Couse.
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