Domino: Shanghai Business District Office Rental Changes

After the epidemic, I signed a single in May. Zhang Zhong name (alias), who had been immersed in the intermediary business of Shanghai office for more than 10 years, said helplessly.

Influenced by the market Domino effect brought by the new crown pneumonia epidemic, Zhang Teng's office rental market in the high-end business district has fallen to the bottom. The vacancy rate is rising, the rent is cut, and the customers are changing frequently.

Data from CB Richard Ellis showed that in the first quarter, the vacancy rate of Lujiazui business district in Shanghai was 20%, with a stock of nearly 2 million square meters. In the first quarter, the Shanghai office market tilted to the tenants, and the owners actively adjusted and optimized the flexibility of the enterprises to cope with the changing business environment. The tenants will usher in more quality upgrading and relocation. The rent price of the whole city has been reduced by 0.9%, and the effective rent has been reduced by 1.5%, of which the average period of installation and exemption is 3.9 months, with an increase of 4.5%.

As an intermediary for office buildings, Zhang Zhong's main job is to carry his customers between the first grade office buildings in Lujiazui. Once the transaction is made, Zhang can get 1-2 commission from the owner. Due to the fact that the property company can't take it every day after work, Zhang Zhongming's working hours are almost synchronous with the commuting time of the white-collar workers in Lujiazui.

In May this year, Zhang Zhong Ming finally welcomed the first single in 2020, successfully rented out a whole office on the edge of Lujiazui business district. The rent is 8 yuan / day / square meter, which is equivalent to the average level of the average rent in Lujiazui business district.

After the rent reduction in 2019, office rent in Lujiazui business district fell again under the impact of the epidemic.

In early June, Zhang Zhong met Liu Jiang (a pseudonym), and Liu Jiang and his friends founded a new round of expansion. Recently, they wanted to find a bigger office space in Lujiazui. Liu Jiang office now has an office space of about 1500-2000 square meters. If you put it in most of the office buildings in Lujiazui, it is equivalent to a whole or two level space. But Liu Jiang's budget is only about 5 yuan / day / square meter. This is not the same as the average rental price of Lujiazui over 10 yuan per day / square meter.

However, Zhang Zhong quickly found several selected office buildings for Liu Jiang. Liu Jiang is also very clear that two years ago the average rental price of Lujiazui will not be less than 8 yuan / day / square meter.

High vacancy rate: the rise of new business circles and small owners' profit leaving

Shanghai center, Jinmao center and global financial center are the three landmark buildings in Lujiazui. Their rental level is also the benchmark for Lujiazui region, at 15 yuan -25 yuan / day / square meter.

Some intermediary staff reflect that the vacancy rate of Shanghai center may be as high as 30%, which is the highest level of vacancy rate since the investment. According to the relevant people of the leasing department, the vacancy rate of the building has been relatively high because of the stricter selection of customers. "If you don't pick customers, you'll be fully rented." Zhang Zhongming said, Jinmao center and global financial center also have requirements for tenants, such as the global financial center once requested to enter the enterprise must be the world's top 500; even if the market is not good, the price of the three landmark buildings has not been reduced easily.

But other office buildings have been transferred to small owners because of some floors. Developers are also hard to unify prices. When prices are bad, price wars are inevitable. According to some office owners, building merchants and property managers and intermediary staff, the rental rate of some office buildings in Lujiazui, Shanghai was more than 90% at the beginning of 2018, but the occupancy rate dropped to 80% in the three quarter, with a drop of more than 10%, and the watershed appeared mainly in the month of 2018. After a year of adjustment in 2019, it experienced an epidemic in 2020, resulting in more financial and investment companies shrinking.

Shanghai Zhongyuan Real estate data show that the Shanghai office market is divided according to the central business district, the core business district and the new business district. As of April 2020, the overall vacancy rate of the core business district is approaching 30%. Obviously, the vacancy rate of individual projects has reached or even exceeded 30%.

An industry pointed out that the highest vacancy rate of 30%, rent decline, small owners selling, etc., leading to the Lujiazui business district office is facing a customer shuffle, and even affect the rent level of the region. In addition to the impact of changes in the economic environment and the adjustment of customer strategies, it is also related to the emergence of new business districts and small owners in Shanghai.

A well-known video barrage website in China has been hiring office buildings from the international shipping finance building in the edge of Lujiazui business district since 2015, from one floor to two floors and three floors. Finally, 4 floors are enough to rent, which is about 10 thousand square meters. In 2019, the preferential policy of attracting investment in Yangpu District was introduced to the office of this enterprise for free office. Naturally, Lujiazui lost this excellent customer. The information about the letter is visible. The registered address of the video website company has been changed to Yangpu District. Nowadays, the rent that the enterprise has rented has been slightly reduced, from 6 yuan per day to 5.6 yuan per square meter.

There are many reasons for enterprises to rent out: some businesses are reducing their own businesses to reduce costs and no longer work in Lujiazui. In addition, there are quite a few new industrial parks in Shanghai, and rent and preferential tax policies are more attractive.

When the market is bad, the rent free period will also be longer for the office owners. If contracted for 3 years, the rent free period will be extended from 2 months to 4 months, half a year, 8 months or even a year, depending on the situation of each office building.

Because the idea of small proprietor is difficult to be unified, the price difference is often greater in the same office building. For example, the State Development Bank building, the rental level of large owners is 7-9 yuan / day / square meter, and a small owner has opened a low price of 4 yuan / day / square meter, hoping to rent out as soon as possible.

There was a wave of fixed asset discount in Lujiazui office building. In twenty-first Century, the exclusive economic report reporter was informed that the Ningbo bank Shanghai headquarters bought 15-20 layers of blue sky blue sky in Lujiazui business district at the beginning of the year. It is understood that the single transaction was reached through the property exchange. The unit price has just exceeded 100 thousand yuan / square meter, compared with the previous developer's highest price of 120 thousand yuan / square meter, has been significantly reduced. And online inquiry of the secondary average price of the project is 73 thousand yuan / square meter.

In the same property exchange website, the reporter also saw many small office owners in Lujiazui selling office buildings at a low price. In recent years there were several high-rise buildings in the blue sky blue sky area. A number of office buildings over 20 years old began to cash out, such as China Merchants Building, which was completed in 1990s. The price is 60 thousand yuan / square meter.

Most of the office buildings in the Lujiazui business district have entered the age of high-rise buildings. The owners have chosen to renovate, attracting many financial control and strict financial and technology companies to enter. Bao Gang Building, located in Chuk Yuen business district, is separated from the Lujiazui business district by a subway station. After renovation, the price has not increased much. However, due to the fierce competition, it has a whole floor of houses. The rent gives a concession: 6 yuan / day / square meter, and 6 months rent free period and parking space. The average rental price of office buildings in the region is 8 yuan / day / square meter.

Between industry and Industry: industry shuffling and demand weakening

Although leasing and selling quotas vary greatly, from the perspective of investment, Shanghai is still a hot spot of capital investment no matter how the economic environment changes.

In the first quarter, Shanghai attracted $4 billion 669 million in foreign investment, an increase of 4.5% over the same period last year. Among them, in March, foreign investment amounted to US $1 billion 872 million, an increase of 20.8% over the same period last year. In January and March, a total of 129 foreign investment projects were signed, with a total investment of US $23 billion 900 million. In the first quarter, there were 10 new regional headquarters and 5 Foreign R & D centers for MNCs.

Shanghai used to be known as the "ten seas market", and now it is also a vanity fair that financial institutions gather. Lujiazui office market changes, mapping is just an industry shuffle, such as foreign retail companies significantly shrink. As the economic uncertainty increases and enterprises postpone decision-making under the epidemic situation, the demand for leasing continues to weaken.

Jones Lang LaSalle pointed out that many companies reassessed office requirements. The net absorption of the entire market is -5.2 million square meters. In addition, the completion date of some projects was postponed to the second quarter or the second half of 2020.

The outbreak has led to a slowdown in demand, resulting in a drop in rents, especially in the non central business district where the vacancy rate is higher. As most of the CBD remained stable and the renewal rate increased, the CBD rents decreased by 0.9%. The rent of non central business district decreased by 2.4%. Zhang Zhongming prefers to consider the decline in the office area of Lujiazui business district as a cycle adjustment. He believes that office buildings are barometer of the economy, the sale of rental market decline, representing the economic environment is not good, but he reckons that Lujiazui business district's small household office returns rate still has more than 5%.

In recent years, Taiwan star couple Lin Ruiyang and Ting Zhang, who have been in mainland China for more than 10 years, have bought a office building in Jing Yao front beach under the name of their micro business brand TST, with a total area of 26 thousand square meters, with a total transaction price of 1 billion 760 million, and the unit price is about 67 thousand yuan / square meter. "At this time, if a company sees development opportunities, venturing into this circle is actually a win-win situation." Zhang Zhongming also revealed that Lujiazui also had demand signals for upgrading and expansion of foreign funds and securities.

Since March, there has been a noticeably increased number of customers in Pudong's benchmark projects and new listing projects. Among them, an auto finance company has signed an office of about 6000 square meters in the eastern part of the United Kingdom. The price of a fresh electric business brand is 9.5 yuan / day / square meter, and it rents a single office building that connects the Lujiazui business district and the bamboo garden business district, about 20 thousand square meters.

However, the wealth effect of the securities market is no longer, and the rectification of relevant financial industry has led to the contraction of Lujiazui's office "battlefield". The Shanghai international financial center, which is about to enter the market, is currently rumored to have a rent level of 12 yuan / day / square meter, compared with the three major landmark buildings.

In fact, from the second half of 2018, the vacancy rate of commercial office buildings in Shanghai and surrounding cities such as Hangzhou and Nanjing rose from 10% to 20% or more.

Shanghai Lujiazui business district has recently seen small investors leaving. "The providers are only some large organizations, and the transaction price is back to the level of 2017, but for small owners, it is also profitable." Zhang Zhongming said that the boom in bulk trading in the previous two years has ceased to exist. In fact, since the three quarter of 2019, the supply of land for Shanghai business office has rebounded markedly, and 6 plots have been sold in one quarter. With the opening of office land last year, the demand of tenants is decreasing, which has triggered a series of chain reactions of "new office buildings entering the market - high office stock - rising vacancy rate".

The first quarter office report released by DTZ reveals that the vacancy rate of Grade A office buildings in Shanghai has reached a record high of 21.1% (the core business circle vacancy rate is 14.8%, the new business circle vacancy rate is 31.6%), and the annulus rate has increased by 1.44% in the first quarter of 2020. The city recorded a net intake of -90545 square meters (the core business district net absorption of -74143 square meters, the new business district net absorption of -16422 square meters). The proportion of small and medium-sized tenants with higher proportion of office buildings is significantly affected by the epidemic, and the vacancy rate has increased. In addition, due to lack of capital and labor force, many enterprises have been suspended and renovated.

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