Shanghai office glut grows with new skyscraper

When completed in 2015, the Shanghai Tower will be the mainland's tallest building. The 632-metre skyscraper will also deepen a glut of office space in the city, putting pressure on rents.

The project, in the Lujiazui financial district, would add 220,000 square metres of office space, or more than 10 per cent of the new supply forecast for the city in 2015, said RET Property Consultancy. About two million square metres of grade A offices would be added in the next two years, more than double the supply in the past two years, Savills said.

The mainland's resolve to turn Shanghai into a global economic, financial and shipping hub by 2020 has led to an office building boom. Rents in the city might fall as much as 17 per cent in the next three years as space was added and the world's second-largest economy strove to maintain growth, CBRE said.

"Such a big supply will pressure office rents in prime locations," said Alex Chen, Shanghai-based senior associate director at RET Property. "The numbers are showing that vacancy rates and rents are definitely heading in a negative direction citywide."

Office rents in Shanghai declined 0.3 per cent to 8.41 yuan (HK$10.66) per square metre a day in the third quarter of this year, the first quarterly drop since 2010, Savills said.

Once finished, the Shanghai Tower will rank as the world's second-tallest building after the 828-metre Burj Khalifa in Dubai. The mainland's current record holder, the 492-metre Shanghai World Financial Centre, is diagonally across Dongtai Road and houses the local offices of Google and Ernst & Young.