Citigroup's property unit is to buy four office blocks in Shanghai's former slum district of Zhabei for US$65 million, suggesting overseas funds are branching out to less expensive areas of the mainland's financial hub.
The 38,000 square metre office space is part of a newly completed 250,000 square metre retail-office-hotel development named Live Hub@Daning in Zhabei, a traditionally industrial area of the city.
The price translates to 13,800 yuan a square metre, less than half of the 30,000 yuan a square metre that properties in the central business district, such as on Huai Hai Road, can fetch.
'The problem is there is no stock available in the heart of the city,' said Jim Yip, an investment director at DTZ Debenham Tie Leung's Shanghai office. 'If there is a property for sale, it will be very expensive.'
The US$200 million retail-office-hotel project was built by Chongbang Group, a private developer formed by Hong Kong professionals involved in building Shanghai's upmarket commercial and entertainment district of Xintiandi.
Chongbang chief executive Henry Cheng, a former Shui On Group executive, said the office premises would be sold to Citigroup next month.
The Zhabei office blocks could generate an annual yield of at least 9 per cent, a target of most funds seeking to buy investment properties, said Mr Yip.