Shanghai Office Market

• The fourth quarter sees five new Grade 'A' office projects handed over, adding 276,200 sqm of space to the market.
• Cumulative net take-up by the end of the fourth quarter amounts to 319,630 sqm.
• Rents fall 4.2 per cent in the fourth quarter, down 16.3 per cent for the whole of 2009 and down 24.2 per cent from peak.
• Shanghai's overall vacancy rate increases to 16.7 per cent in the fourth quarter, with both supply and demand picking up.
• Shanghai's en bloc office investment market sees a pick up in activity from domestic investors in the fourth quarter.
• Shanghai government announces construction restrictions to take effect during the 2010 World Expo.

Shanghai Retail Market

• Average first floor prime rent remains unchanged in the fourth quarter at RMB33.7 per sqm per day.
• Year end average first floor prime rent falls 7.8 per cent in 2009 compared to 2008.
• Citywide prime shopping mall vacancy rate remains unchanged at 3.4 per cent at the end of the fourth quarter.
• Three new shopping malls launched onto the market in the fourth quarter, adding 150,000 sqm to the market.
• A total of 415,000 sqm of shopping mall supply is launched onto the market in 2009, of which prime supply only accounts for 5 per cent.
• Well established projects look to increase space dedicated to fashion and accessories retailers in an attempt increase rental revenues.

Shanghai Residential Leasing Market

• Demand for good quality residential property returns as companies ramp up secondments with the expectation of reinforced commitment and/or expanding their operations in China.
• Citywide occupancy rates have recovered since their low in the second quarter reaching 80.7 per cent by the end of the year.
• Rents stabilised towards the end of the year as demand picks up, reaching an average of RMB156.7 per sqm per month.
• Pudong's villa market maintained stable rent and occupancy rate growth, with the average rent reaching RMB152.8 per sqm per month and the occupancy rate reaching 93.0 per cent.
• Luxury apartment and villa markets saw higher growth rates in both rents and occupancy rates compare to the rest of the market with rents rising to RMB253.4 and RMB169.2 per sqm per month while occupancy rates reach 78.5 and 95.1 per cent respectively.

Shanghai Residential Sales Market

• Monthly residential supply fell 13.4 per cent in the first two months of Q4 as developers exhaust available stock.
• First-hand transaction volume in Q4 remains healthy as buyers rush to acquire properties before tax breaks are rolled back.
• Average first hand transaction price continues to rise in the first two months of Q4 increasing to RMB18,699 per sqm in November.
• High end properties continue to attract significant interest recording record high transaction volume in properties priced above RMB30,000 per sqm in the first two months of Q4 in both the villa and apartment markets.
• Second hand transaction volume records its highest level to date in November. Prices, while not rising as fast as in the first hand market, showed considerable growth in the first 11 months of the year.
• Government takes initial steps designed to cool the market in the year ahead creating uncertainty in the market as to future prospects.

SAVILLS 2010 OUTLOOK

Shanghai Office Market

• Demand is expected to continue improving along with an improving global economy. With a large amount of new high quality space offering attractive rents there will be great incentive for tenants to relocate.
• Supply pressure is expected to increase with around 1 million sqm expected in 2010. 67 per cent of this is expected to be in Pudong.
• Remaining vacant space is expected to see rents continue to fall. It is estimated that rents will fall between 8 and 14 per cent in 2010.
• Shanghai's overall vacancy rate is expected to increase to around 25 per cent by the end of 2010.

Shanghai Retail Market

• Shopping mall supply predicted to rise to a record high of 821,000 sqm in 2010, of which 59 per cent will be located in emerging retail districts.
• Leasing demand expected to continue to pick up with a number of international retailers actively looking for space in Shanghai.
• Prime shopping mall rents expected to start rising again in 2010 supported by steady demand.
• Huaihai Road (M) to see more high-end retailers creating competition with Nanjing Road (W).

Shanghai Residential Leasing Market

• MNCs will continue cost cutting focus in 2010, and housing budgets to be similar to 2009.
• Increasing competition expected to be seen next year from both individual landlords with improving property quality and service provision and hotel groups encroaching on the mid term stay market.
• Occupancy to pick up especially in the serviced apartment market as the influx of expatriates for the Expo increases demand.
• Rents expected to show moderate rises in 2010. Serviced apartments to show the strongest growth supported by short to mid stay demand from Expo visitors, strata apartment and villa rent growth expected to be more moderate.
• Post Expo, demand, occupancy rates and rents likely to revert to pre-Expo levels.

Shanghai Residential Sales Market

• Residential transaction volume likely to fall in 2010 as the possibility of price corrections may turn away buyers from the market.
• Prices expected to moderate as the market consolidates recent prices rises and as demand abates.
• Government expected to continue to monitor the market closely and utilise micro measures including tax adjustments and monetary policy to engineer a stable market.
  - Support low income home buyers with preferential policies and increased supply.
  - Control / limit investment by investors / speculators held responsible for the recent rapid rise in prices.

Information provided by:
Savills Research & Consultancy

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