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Friday 30 October 2009
Decentralised offices in Shanghai may cut costs by up to 50pc
Corporate tenants in Shanghai could save up to 50 per cent of their occupancy costs next year if they were to move to grade A offices in the city’s emerging business areas.
Decentralised offices in Shanghai may cut costs by up to 50pc
Daniel Ren in Shanghai 28 October 2009
Corporate tenants in Shanghai could save up to 50 per cent of their occupancy costs next year if they were to move to grade A offices in the city’s emerging business areas.
The supply of office space in the “decentralised” office blocks - those outside the central business district - will increase rapidly in the near future, offering tenants lower rents, while the expansion of the metro railway lines makes the new offices more accessible, according to a report by Jones Lang LaSalle.
Shanghai has 331,000 square metres of office space in the decentralised grade A office market. The space was expected to reach 500,000 sq metres at the end of this year before doubling to a million sq metres in 2010, the report said. By 2013, 1.8 million sq metres would be available.
“These decentralised grade A office projects offer lower-cost options a short distance from the CBD with high-quality specifications,” said Anthopny Couse, a managing director of Jones Lang LaSalle Shanghai.
“They represent the first generation of grade A offices outside the CBD suitable for large multinational occupiers and will become a major force in the market.”
On average, decentralised space is 31 per cent cheaper than central business district space and the price gap is likely to widen to 50 per cent in the next two years.
Premium grade A buildings in Shanghai can cost up to 7.10 yuan (HK$8.06) per square metre a day while the rate in the decentralised area stands at about four yuan.
“The rapid growth of CBD rents between 2001 and 2008 has many tenants in a difficult financial situation,” the report said. “Higher rents and larger space requirements meant that it was no longer economical for tenants to acquire larger space in the CBD.”
Petrochemical giant BP has moved its 8,500 sqmetre office from Plaza 66 on Nanjing Road to You You International in Pudong, a move that saved the company millions of yuan in occupancy costs.
In the past, a move to a decentralised location would result in a loss of staff because the employees wanted to remain in the CBD, which was easily accessible by the subway network.
“Better accessibility going forward will result in less employee opposition to decentralisation,” the report said. “The expansion of the metro network ahead of the 2010 World Expo is making decentralised offices more convenient, accessible and attractive.”
By May 2010, when the World Expo opens, Shanghai will be operating 11 metro lines, allowing out of the way offices to have access to the central business district within 30 minutes.
Shanghai is following in the footsteps of overseas cities such as Hong Kong in developing the market, a move to cut costs for multinational companies and increase office supply.
According to Jones Lang LaSalle, Shanghai is the first mainland city to have developed a clearly defined non-central market for grade A offices.
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Decentralised offices in Shanghai may cut costs by up to 50pc
Daniel Ren in Shanghai
28 October 2009
Corporate tenants in Shanghai could save up to 50 per cent of their occupancy costs next year if they were to move to grade A offices in the city’s emerging business areas.
The supply of office space in the “decentralised” office blocks - those outside the central business district - will increase rapidly in the near future, offering tenants lower rents, while the expansion of the metro railway lines makes the new offices more accessible, according to a report by Jones Lang LaSalle.
Shanghai has 331,000 square metres of office space in the decentralised grade A office market. The space was expected to reach 500,000 sq metres at the end of this year before doubling to a million sq metres in 2010, the report said. By 2013, 1.8 million sq metres would be available.
“These decentralised grade A office projects offer lower-cost options a short distance from the CBD with high-quality specifications,” said Anthopny Couse, a managing director of Jones Lang LaSalle Shanghai.
“They represent the first generation of grade A offices outside the CBD suitable for large multinational occupiers and will become a major force in the market.”
On average, decentralised space is 31 per cent cheaper than central business district space and the price gap is likely to widen to 50 per cent in the next two years.
Premium grade A buildings in Shanghai can cost up to 7.10 yuan (HK$8.06) per square metre a day while the rate in the decentralised area stands at about four yuan.
“The rapid growth of CBD rents between 2001 and 2008 has many tenants in a difficult financial situation,” the report said. “Higher rents and larger space requirements meant that it was no longer economical for tenants to acquire larger space in the CBD.”
Petrochemical giant BP has moved its 8,500 sqmetre office from Plaza 66 on Nanjing Road to You You International in Pudong, a move that saved the company millions of yuan in occupancy costs.
In the past, a move to a decentralised location would result in a loss of staff because the employees wanted to remain in the CBD, which was easily accessible by the subway network.
“Better accessibility going forward will result in less employee opposition to decentralisation,” the report said. “The expansion of the metro network ahead of the 2010 World Expo is making decentralised offices more convenient, accessible and attractive.”
By May 2010, when the World Expo opens, Shanghai will be operating 11 metro lines, allowing out of the way offices to have access to the central business district within 30 minutes.
Shanghai is following in the footsteps of overseas cities such as Hong Kong in developing the market, a move to cut costs for multinational companies and increase office supply.
According to Jones Lang LaSalle, Shanghai is the first mainland city to have developed a clearly defined non-central market for grade A offices.
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