Beijing office space almost 50 per cent more expensive than in Shanghai

Shanghai may aspire to becoming a global financial centre but since 2010 it has lost its position to Beijing as the mainland's most expensive office location and is unlikely to see a return to that past glory in the next five years.

A huge supply in the pipeline will force many of Shanghai's landlords to cut rents to secure tenants to fill their buildings.

"In the period up until 2010, Shanghai Grade A rents were substantially higher than those being asked for equivalent properties in Beijing, with the gap reaching its most extreme point in 2008 when Shanghai Grade A rents - at 350 yuan per square metre - were fully 64 per cent higher than those in Beijing," said Andrew Ness, DTZ's head of research for Greater China.

"Currently, Grade A office rents average 268 yuan [HK$340] per square metre per month in Shanghai and 382 yuan per square metre per month in Beijing, so Grade A office rents in Beijing are indeed 43 per cent higher than those being quoted for similarly high-grade buildings in Shanghai," said Ness. A separate study by Colliers International found a similar trend and highlighted that, on net effective rent, Shanghai lost its most expensive office location mantle after the global financial crisis.

Mainland corporations expanded their office presence in Beijing rapidly under the central government's four trillion yuan economic stimulus package, bringing office rents in the city up 42.6 per cent year on year in 2011.

Average Grade A office rents in Beijing have been above Shanghai's since then. "On the other hand, multinational companies which have a presence in Shanghai consolidated or stopped expansion post global financial crisis," said Carlby Xie, director of research at Colliers China.