The cost of renting high grade offices in
Shanghai is close to overtaking that of downtown New York, according to a new survey which underlines China’s rapid economic growth.
The Pudong district in the Chinese city is now the 41st most expensive place to occupy in the world, just behind lower New York at 40th.
For the first time, China has three districts in the Global Market Rents Top 50 compiled by CB Richard Ellis, the property agents, which measures prime A-grade property across the world.
These are Pudong (41), Shanghai’s new business district, Puxi (48), the city’s more established commercial area, and
Beijing (50).
The trend reflects China’s emergence as a global economic power.
China’s trade surplus with the US is now running at around $160bn a year. For 2004, its gross domestic product increased 9.5 per cent while industrial production was up 16 per cent.
This growth has been accompanied by an explosion of construction, especially in China’s biggest cities, whose population has mushroomed due to an influx of rural labourers.
However, the speed of property development in China has raised fears of a bubble that could burst if demand slowed down. In Puxi, for instance, vacancy levels are running between 25 per cent and 30 per cent.
“Although
Beijing and
Shanghai are oversupplied at the moment, that supply is of questionable quality and aimed at the local market rather than international investors,” said Michael Haddock of CBRE. “The space that is built to suitable specifications and appropriate for international occupiers is limited, pushing up the price.”
China-based property experts said demand for prime office properties in Shanghai, and especially Puxi, was strong late last year. While Shanghai’s residential prices and rents have fallen since early 2004, office prices and rents have continued to rise, according to property researchers DTZ.
David Hand, managing director for Jones Lang LaSalle in Beijing, said that compared with a decade ago, China’s larger cities were not at risk of witnessing a major price correction since the volumes of both supply and demand had risen sharply since then, making for a healthier market.
But he nonetheless pointed out China’s property market remained “embryonic” in many respects.
“We still have to get to the point where there is an active secondary market,” added Anna Kalifa, the head of research for Jones Land LaSalle in Beijing.
Mr Hand also noted that multinationals generally preferred to lease expensive office space while Chinese companies were more prone to buying properties.
A handful of international property developers are taking their first tentative steps into the Chinese market, although the risks and barriers to entry are still considered high.
Meanwhile, London’s West End remains the most expensive location in the world, at $191.60/sq ft a year. It is followed by London’s City at $125.80, central Tokyo at $124.36, outer Tokyo at $119.51 and Paris at $96.12.
By contrast, downtown New York is $37.80/sq ft a year and Pudong in
Shanghai is $37.61.
Some experts caution against direct comparisons of office costs, given that rent is often measured in different ways in different countries.
