After years of dealing with an office supply shortage, Shanghai is likely to have the largest pipeline of prime office completions by 2020, according to research from JLL. The city will overtake Hong Kong, Sydney and Tokyo in terms of office supply as Shanghai’s central business district will add 1.1 million sq. metres of office space during the next 4 years while an additional 3.3 million sq. metres is expected in the city’s secondary business districts.
With office rents in Shanghai increasing, secondary areas are proving to be more attractive. A growing number of cost conscious tenants are moving to new CBD areas like Railway Station, the North Bund and Qiantan. Should Shanghai’s overall office market supply increase as predicted, it will surpass 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. This high level of forecast demand for office space is likely to absorb the massive supply pipeline over time,” says Joe Zhou, Head of Research, China at JLL.
One of the key reasons for the office demand boom in China is due to the growing number of technology companies needing space, notes JLL. Companies in the tech sector are catching up with financial services and professional services companies when it comes to absorption levels in China’s main cities.
“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. This trend is supported on the supply side as well, with all 4 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,” says Dr Megan Walters, Head of Research, Asia Pacific at JLL.
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