On April 14, Jones Lang LaSalle released the report of Shanghai real estate market in the first quarter of 2022.
Zhang Jing, managing director of Jones Lang LaSalle in East China and director of commercial real estate department in China, said: “from January to February, the rental demand of office buildings in Shanghai remained strong, mainly due to the active diversified tenants in the market, among which manufacturing trade, life science, finance and professional service enterprises are the most prominent.”
The report shows that the real estate market in Shanghai will maintain a strong momentum as a whole at the beginning of 2022. In the first quarter of this year, the net absorption of class A office building market in Shanghai still recorded 295000 square meters. The vacancy rate of class A office buildings in Pudong and Puxi central business district decreased significantly, driving the continuous growth of rent.
However, under the impact of the epidemic in March, Shanghai’s real estate market activity pressed the “pause key”, and the demand weakened in the short term. It is expected that the rental performance of the office building market will face pressure. Jones Lang LaSalle believes that despite the current epidemic and many uncertain factors, investors still pay high attention to the long-term rental apartments, biomedicine and logistics sectors, and the logistics real estate market has maintained a strong rental demand and rental growth momentum as a whole.
some sectors have active rental demand
Jones Lang LaSalle reported that in the first quarter of 2021, the net absorption of class A office building market in Shanghai had reached the highest quarterly value since 2019.
In the first quarter of this year, the net absorption of class A office building market in Shanghai recorded 295000 square meters, an increase of 7000 square meters year-on-year. Among them, the central business district recorded a net absorption of 44000 square meters, and the non central business district recorded a net absorption of 252000 square meters.
Wang Yue, head of the Pudong team of Jones Lang LaSalle Shanghai commercial real estate department, said: “in the first quarter of this year, Pudong contributed significantly to the net absorption in the central business district of Shanghai, and the rental demand of domestic financial services and professional services companies in Shanghai Lujiazui Finance & Trade Zone Development Co.Ltd(600663) and Zhuyuan sectors was particularly active.”
Overall, in the absence of new supply, the vacancy rate of class A office buildings in the central business district of Shanghai continued to decline in the first quarter of this year. Among them, the vacancy rate of Puxi central business district was 5.8%, down 0.2% month on month. A large number of pre rent inquiries were received for the office building project to be completed; Driven by the strong rental momentum, the vacancy rate in Pudong central business district was 8.9%, down 1.0% month on month.
It is understood that there are three newly completed projects in Shanghai’s non central business district, covering a total area of 233000 square meters. However, despite the active pre lease inquiry, the rental demand of non central business district is not as good as that of central business district. The overall vacancy rate is 23.9%, down 1.0% month on month.
“The rent of Grade A office buildings in Shanghai continued to increase in March.” The report shows that the rent of Puxi central business district increased by 2.4% month on month due to the continuous improvement of owners’ mentality. In Pudong CBD, with the market recovery, some relatively old building leasing activities are also more active, driving the rent of Pudong CBD to rise by 2.0% month on month. In the non central business district, the recovery of multiple sectors also led to an average rent increase of 2.5% month on month.
Jones Lang LaSalle also pointed out that the epidemic will affect rental activities and real estate decisions. It is expected that the new rental demand may weaken in the short term, and the rental performance will also face pressure.
second half of the year or potential investment opportunities
Since the fourth quarter of 2021, affected by the reduction of interest rate, the shortening of lending cycle and the suspension of real estate tax, institutional investors expect developers to sell assets at a substantial price to ensure capital liquidity. However, in the actual exit cases, most of the prices still maintain the normal market level.
Jones Lang LaSalle expects that next, institutional investors will maintain a wait-and-see attitude, and the acquisition opportunities may be inclined to state-owned enterprises. At present, under the influence of covid-19 pneumonia epidemic in Shanghai and other places, properties and communities that can provide high-quality services are sought after by renters. Therefore, long-term apartments with strong operation ability and high-quality services will receive continuous attention from investors.
In terms of industry, since the global covid-19 pneumonia epidemic occurred at the end of 2019, the whole biomedical industry has risen and flourished, further driving the expansion demand of upstream and downstream industries and stimulating investors’ positive attitude towards the layout of life science park.
“Thanks to the mature industrial agglomeration and rich talent base, Zhangjiang sector continues to receive leasing inquiries from life science enterprises. At the same time, Jinqiao and Zhoukang sectors also receive more attention from life science enterprises to undertake some spillover demand,” the report said
The report also pointed out that in the first quarter of this year, the logistics real estate leasing activities in Shanghai remained stable. “In this quarter, the net absorption of logistics real estate in Shanghai recorded 84000 square meters, and the vacancy rate of the overall non bonded logistics warehousing market also decreased from 9.7% to 8.5%.”
“The performance of the logistics market is still strong, and the storage demand maintains high growth.” Jones Lang LaSalle said that despite the impact of the epidemic, the logistics market will face certain pressure in the short term and the return on investment of logistics projects will decline, in the long run, investors will continue to pursue logistics investment opportunities. It is expected that there will be a large number of sales plans of logistics asset packages this year.
“Although affected by the current epidemic and many uncertain factors, investors still pay high attention to the long-term rental apartment, biomedicine and logistics sectors. We expect that with the end of the target investment cycle of investment institutions entering the market in previous years, a large number of assets will exit the market in the second half of this year, bringing more investment opportunities to the market.” Sun Ling, East China capital market director of Jones Lang LaSalle, said.
