Economy

Office rental market sees rebound in first quarter

By Hu Yuanyuan and Wang Ying (China Daily)
Updated: 2010-04-08 10:04

BEIJING: The Grade A office market in China's key cities showed a strong rebound in the first quarter, as the global economic recovery led to rising rents for the first time since the recession and brisk investment activities, major real estate service providers said on Wednesday.

Office rental market sees rebound in first quarter

Construction is ongoing in the central business district in Beijing. [Zhang Kaixin / For China Daily]

With the demand growing and vacancy rates decreasing, Grade A office rentals in Beijing this quarter increased for the first time after six consecutive quarters of decline. Rents increased by 3.6 percent quarter-to-quarter to 242 yuan per sq m per month, statistics from Jones Lang LaSalle showed.

"Though multinational companies, especially in finance, bio-pharmaceutical and high-technology sectors are actively looking for office space, around 52 percent of new leasing transactions this quarter were still from domestic companies," said Qin Xiaomei, chief researcher of Jones Lang LaSalle Beijing.

Average office rents in Shanghai edged up 1.7 percent quarter-on-quarter to 6.9 yuan per sq m per day in the first three months, marking the first growth over the past 18 months, according to Colliers International. During the same period, vacancy rate decreased 1.5 percent to 13.7 percent.

"Strengthened market confidence led to the overall rent rise," said Hingyin Lee, director of Colliers East China division's research and advisory department.

Newly finished office buildings in Lujiazui, the iconic region of Shanghai's financial center, reported an impressive 92 percent occupancy rate; the first phase of Sun Hung Kai's International Finance Center, or the HSBC Tower had 96 percent area occupied; and even the super-sized Shanghai World Financial Center (SWFC) had occupancy rate exceeded 74 percent, according to JLL Shanghai.

Besides the rising rents, en-bloc property transactions were extremely active this quarter, with capital values continuing to increase at a rapid pace. Overseas institutional investors purchased several projects in Beijing. For example, Mapletree, a Singaporean MNC, acquired Gateway Plaza near Sanyuanqiao for around 2.9 billion yuan.

"Foreign real estate funds are much more optimistic about China's office market this year, as they find it easier to raise money and recognize the growth potential of China's commercial property," said Grant Ji, director of Savills (Beijing).

UBS Global Asset Management on Wednesday announced that it has successfully concluded the first closing of its joint-venture with Gemdale Corporation, a leading listed real estate developer in China. It would invest in residential development projects in first-tier and selected second-tier cities in China.

In Shanghai, a total of 18.9 billion yuan worth of en-bloc transactions were made from January to March in Shanghai, ten times the amount a year earlier. There was 28 billion yuan worth of property acquisitions made in 2009, which means the first three months had accomplished 67.5 percent of last year's total trading volume, said JLL Shanghai.

According to Kurt Jia, National Director with JLL Investment Shanghai, the second quarter is going to be more optimistic as there are a lot of deals in the pipelines. The outlook that the central government would tighten loans policy in the second half this year might push many deals to close earlier, Jia added.