Shanghai – According to the latest research reports issued by Knight Frank, Shanghai’s retail, residential and office markets are set for recovery in the coming quarters. Knight Frank research of the three major markets shows softening rents and increased investor confidence, signals of economic recovery.
Ms Regina Yang, Head of Research & Consultancy, Knight Frank Shanghai, says “Shanghai’s retail, residential and office markets have each experienced narrow drops in rents and either stabilised or reduced vacancy rates. The government’s stimulus policies aided in the steady growth of Shanghai prime offices and initiated an increase in investor activity and commencement of grade A construction projects. Following the office market trends, the prime retail market experienced strong retail sales growth and luxury residential market witnessed increases in sales and leasing transactions. Shanghai’s markets are demonstrating strong signs of recovery to come in the coming quarters.”
Shanghai prime offices saw average rent soften by 3.5 percent from the previous quarter to RMB 8.36 per square metre per day. Average vacancy rate stood at 16 percent, similar to its quarter one value. The government’s investment of RMB 500 billion in the city’s infrastructure projects and additional investment of RMB 160 billion were a strong catalyst to the city’s GDP value of RMB 661.2 billion, a year on year growth rate of 5.6 percent. Additional government investment aimed to attract foreign investment is expected to increase the quarter’s FDI value of US$ 5.159 billion in coming quarters.
The prime retail market saw the opening of new retail centres as well as the establishment of international luxury brand shops in the city during the quarter. Average rent of prime retail properties decreased by one percent quarter on quarter to RMB 34.8 per square metre net per day. The vacancy rate dropped to seven percent, however, the 800,000 square metres of new retail property expected to join the market in the next 12 months could increase vacancy rates and decrease rents. The prime retail market is expected to remain in the third quarter and though supply is large, revamped and newly built malls will increase retail quality.
The luxury residential market witnessed an increase in residential leasing and sales transactions from the previous quarter. Several leasing projects closed for renovations and will be added to the sales market where they will be joined by more than ten new sales only luxury residential projects. Though average rent further softened to RMB 145.6 per square metre per month this quarter, a warming leasing market is signalled by narrowing falls in rents. The luxury sales market transaction volume increase 224 percent quarter on quarter to 417,681 square metres while the average price increased to RMB 42,075 per square metre. The expected decrease in leasing volume during the summer holiday will mean stabile rents and vacancy rates in the next quarter while the completion of new sales properties will decrease sales prices in the coming quarters.
“Several factors indicate Shanghai’s markets are returning to pre-crisis levels. Investor confidence is a strong sign of economic resurgence, and this quarter saw the opening of retail malls and the purchase of downtown land by developers” continued Ms Yang.
Ms Yang concludes, “Shanghai markets have experienced steady improvement in both leasing and sales as tenants become more active and buyers more optimistic. A recovering market is expected as developers/institutional investors either jump start postponed projects or start to seek new opportunities to re-enter the market.“