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Chinese city will have the largest pipeline of prime office completions by 2020, shows data from real estate consulting firm JLL
Shanghai, 13 April 2017 - Shanghai is expected to have the largest pipeline of prime office completions by 2020, overtaking Hong Kong, Sydney and Tokyo. Shanghai's central business district is set to receive approximately 1.1 million square metres of office space by 2020, with several new completions expected in 2017, following years of supply shortage.
An additional 3.3 million square metres of office development is expected in the decentralised Pudong, Hongkou and Minhang submarkets. This will bring total Grade A office space in Shanghai to 11 million square metres by 2020, surpassing Hong Kong as the largest office market in Greater China.
"Domestic firms are expected to drive demand for Grade A office space in Shanghai, while more multinationals are anticipated to vie for prime office space to capture a larger slice of the burgeoning Chinese consumer market by 2020," says Joe Zhou, Head of Research, China at JLL. "This high level of forecast demand for office space is likely to absorb the massive supply pipeline over time."
However, with rising office rents in Shanghai, an increasing number of price-sensitive tenants are shifting to emerging business areas outside the traditional CBD. Fringe districts such as Railway Station, the North Bund and Qiantan are especially attractive to tenants due to convenient access to CBD core areas. This is a trend increasingly observed across the whole Asia Pacific region, with cities such as Sydney and Mumbai seeing a boom in their Secondary Business Districts.
JLL data indicates that in China, technology firms drove Grade A net absorption in Shanghai, Beijing, Shenzhen, Guangzhou, and Chengdu. Tech company-driven net absorption levels were higher than other sectors such as manufacturing in 2016, and tech firms are currently catching up with the absorption levels of financial services and professional services companies.
"Large volumes of capital funding are enabling more tech companies such as Didi Chuxing and Baidu to upgrade or expand to Grade A office space as they seek to make themselves more attractive to talent," says Dr Megan Walters, Head of Research, Asia Pacific at JLL. "This trend is supported on the supply side as well, with all four Tier 1 cities in China having rapidly-growing emerging CBD markets that offer large amounts of new Grade A space, usually at rents that larger tech companies can afford."
A growing number of tech companies are likely to make co-working spaces, serviced offices, and public spaces an integral part of their real estate portfolio. Companies are increasingly consolidating in fewer core locations; complemented by a network of flexible space. These liquid spaces – such as co-working spaces and serviced offices – promote collaboration, offer employees greater autonomy, as well as provide an agile and scalable real estate portfolio.
By 2030, on-demand office space is expected to comprise nearly 30 per cent of corporate real estate portfolios.
For more information on JLL's Offices 2020, click here.
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JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $59.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, www.jll.com.
JLL has over 50 years of experience in Asia Pacific, with over 34,000 employees operating in 92 offices in 16 countries across the region. The firm won 15 awards at the International Property Awards Asia Pacific in 2016 and was named number one real estate advisor in Asia at the 2015 Euromoney Real Estate Awards. www.jll.com/asiapacific
In Greater China, the firm was named ‘Best Property Consultancy in China’ at the International Property Awards Asia Pacific 2016, and has more than 2,200 professionals and 14,000 on-site staff providing quality real estate advice and services in over 80 cities across the country. www.joneslanglasalle.com.cn
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