Shanghai office rents tipped to rise 15pc on strong growth

The mainland's continued strong economic growth is prompting many companies to expand and upgrade their offices in Shanghai, and the trend is expected to drive rents of top grade A offices higher this year despite new supply.

'Rents will continue to rise on both sides of the river throughout 2011,' predicted Anthony Couse, managing director of property management firm Jones Lang LaSalle in Shanghai. 'We expect Pudong rents to go up by between 10 and 15 per cent in 2011, and Puxi office rents to rise 15 per cent.'

In a recent report on the market, Jones Lang LaSalle noted that the average rental for grade A offices in Shanghai's central business district in the final quarter of last year was 7.50 yuan (HK$8.78) per square metre per day, or over 228 yuan per square metre per month. That represented a 20 per cent increase over the same quarterly period in 2009.

Rents for premium grade A offices recorded smaller growth of 17.1 per cent year on year, to a daily rate of 8.50 yuan per square metre, or a monthly rate of around 258.50 yuan per square metre, the study found. Office rents in Puxi showed the largest quarterly growth since the first quarter of 2005, as rents surged 7.1 per cent quarter on quarter in the last three months of 2010, the research showed. Couse said multinational companies, particularly from manufacturing and professional services firms, were resuming expansion on the mainland.

Demand for office space was particularly strong in the newly completed Wheelock Square, the tallest building in Puxi. Developed by Wharf (Holdings), the 2.5 billion yuan project comprises a 61-storey main tower with 107,000 square metres of office space, plus two annex buildings accommodating high-end retail and food and beverage outlets.

One of its largest tenants is US pharmaceutical firm Bristol-Myers Squibb which has taken three floors totalling around 6,400 square metres in the tower.

Dave Siu Wing-koon, Wharf China Estates' general manager of estates management in Shanghai, said some tenants 'are relocating from other districts to upgrade, expand or consolidate their offices under one roof'.