CBRE report: Domestic firms' demand for office space rises in Shanghai

A recent report showed that financial enterprises remain the major tenants of first-class office buildings in Shanghai.

By the end of the first quarter of 2017, financial enterprises had rented 36 percent of the Class A office space in the city, which was the highest rate nationwide, according to a report released by Los Angeles-based commercial real estate and investment firm CBRE Group.

After tracking 115 Class A office buildings with floor space of 6.9 million square meters and nearly 4,000 corporate tenants in major business districts in Shanghai, CBRE analyzed the leasing conditions in Shanghai in 2017.

Shanghai has become an international economic center after years of development, according to Zhang Yue, head of office building services in East China for CBRE. After the establishment of Shanghai Free Trade Zone, emerging financial enterprises specializing in wealth management, derivative investments and financial information services have become a major driving force behind the rising demand for office space in the financial sector, Zhang said.

The report showed that enterprises from the technology, media and telecom (TMT) sector are also important tenants as they occupy 8 percent of the Class A office space in Shanghai. However, the report noted that, due to rising costs and industrial relocation, the number of tenants from the manufacturing sector has declined significantly compared with 2015.

The report also found that the demand for office space among domestic enterprises has posted a remarkable rise in Shanghai. Domestic enterprises currently occupy 45 percent of Class A office space in the city, up from 37 percent in 2015. Among all the 4,000 enterprises surveyed, more than 2,000 domestic firms have rented office buildings in Shanghai, an increase of 50 percent compared with 2015. As a result, they have surpassed foreign enterprises to become important new tenants of office space in the city.

CBRE also conducted a survey among the "super tenants" that rent more than 10,000 square meters of office space, and found that Shanghai is home to the largest number of such tenants. In Shanghai, 55 super tenants occupy 21 percent of office space. Zhang noted that 70 percent of super tenants in Shanghai are foreign companies.

The rental trend is increasingly related to location, according to the report. Most foreign firms rent office space on the western bank of the Huangpu River, while domestic companies tend to settle in Lujiazui or Zhu Yuan business districts of Pudong on the east bank of the river.

In Lujiazui business district, 61 percent of office space is occupied by financial enterprises and 14 percent by enterprises providing professional services such as legal consulting. In Zhu Yuan business district, financial firms and TMT firms rent 54 and 16 percent of office space.

Zhang predicted that rental prices in Shanghai may face downward pressure in the second half of 2017 due to increased supply of new office buildings. Tenants have become more demanding of office space and green buildings with flexible working space will be increasingly popular, Zhang said.