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News Release

Qingdao

Jones Lang LaSalle: Qingdao office and retail sectors active, while high-end residential cools down in 2Q10


In the second quarter of 2010,  Jones Lang LaSalle saw dynamic activity in Qingdao’s real estate sector, fuelled by surging office demand. This lead to an increase in rents and new gains among Grade A supply in the retail sector. “Driven by domestic consumption, the local property market, especially the office and retail sectors, have given us confidence that we are on our way to a healthy economic recovery, and sustainable growth across all sectors.” said Michael Hanschen, General Manager of Jones Lang LaSalle, Qingdao.
 
Office

The second quarter of 2010 saw the completion of Fudu Plaza in Shinan District, adding 16,000 sqm of new office space to the market. The quarter also witnessed a boost to landlords' pricing power due to growing demand, which was primarily driven by domestic companies, especially those in the financial sector. This resulted in the city's average rents rising to RMB 79.5 per sqm per month—a 0.7% increase q-o-q.
 
Grade A office asking rents slightly increased by 0.97% q-o-q to reach RMB 125 per sqm per month. The vacancy rate for Grade A properties was at 35.9%, a decrease of 0.9% q-o-q. Incidentally, Qingdao’s Grade A property data now includes Hong Kong Middle Road's COSCO Plaza and Donghai Road's Porche Centre.  Shangri-La Centre’s occupancy rate reached nearly 40%, with approximately 2,150 sqm of office space leased in 2Q10. New occupiers of Shangri-La Centre include Fullerton, Agilent Tech, Hamburg SUED, Shieldspear, China Resources and more. Office supply is still on the rise as 121,803 sqm and 126,769 sqm of Grades A and B office space will be completed in 2H10; the addition of which is expected to lead to a further rise in vacancy rates next quarter.
 
Retail

The long-awaited opening of the new landmark development Marina City came in mid-April, which was then followed by the completion of Darling Harbor in June. These two projects brought another 116,000 sqm of space into Qingdao’s retail market, and attracted major global fashion brands such as Zara, H&M, UNIQLO, and more. This quarter also saw international chains such as McDonald's and KFC open several branches across Qingdao’s CBD?.
 
Meanwhile, new retail projects were announced during the second quarter as rentals decreased by 1.4% to reach RMB 475 per sqm per month, while vacancy rates increased 8% to 19%. At present, only 60% of Marina City's retail space is operational, additionally, another two projects totaling 62,000 sqm  are set to be completed in the second half of 2010, vacancy rates are expected to remain high.
 
High-end and Luxury Residential

In mid-April, the central government introduced further measures to cool down the residential market, ending the home sales rebound that began in March. Consequently, the market slipped back into “wait-and-see” mode through April and May, although there were no reactions from the developers as newly launched properties maintained their current capital value.
 
Luxury sales price reached RMB 23,344 per sqm, increasing 2.04% q-o-q; while sales rates declined by 3% to 15%. On the other hand, high-end sales price slightly decreased by 0.89% to reach RMB 13,850 per sqm, while the sales rate increased 25% to 43%, thanks to a project in Laoshan District, which sold 81 units in 2Q10. Completions in the second half of 2010 include 1,590 high-end units and 1,040 luxury units.
 
The government's new policies have had little effect on consumers of Qingdao’s luxury market as the buyers of this segment are “cash-rich” individuals from Qingdao and surrounding locations. Nonetheless, developers have been cautious in launching new projects due to the newly implemented policies. The second quarter saw no new completions, while only 130 high-end units were launched during this period.