Beijing, Shanghai Office Rent Surge Sends Firms Out of Downtown

Aug. 21 (Bloomberg) -- Zhang Xin, chief executive officer of Soho China Ltd., the biggest developer in Beijing’s central business district, talks about the company's financial results, business strategy, and the outlook for the country's real estate market and economy. Soho China said yesterday underlying profit in the first half more than doubled with increased earnings from property sales. Zhang speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Companies with offices in Shanghai and Beijing are moving from downtown to less centralized areas in the face of the fastest-growing office rents in Asia.

The cost of renting an office in Beijing more than doubled while Shanghai rents are up 43 percent in the past four years, Cushman & Wakefield Inc. said in a report. In Beijing, office rents are 30 percent lower in non-core areas while in Shanghai rents are half of what they are downtown, it said.

“The rise of rents in core submarkets is the primary force affecting decentralizing trends in office selection,” the authors led by Sigrid Zialcita, Singapore-based managing director for Asia-Pacific research at Cushman, said in the report. “Core districts in these cities will face a potential challenge in lack of sufficient future supply, while at present, non-core submarkets are undergoing rapid development.”

Decentralization in Beijing and Shanghai follows a similar trend in Hong Kong that began before the financial crisis in 2008, with financial companies including Morgan Staley, Deutsche Bank AG, and Credit Suisse Group AG, moving from Central to Kowloon, according to Cushman.

Soho China Ltd. (410), the biggest developer in Beijing’s central business district, reported Aug. 20 that its underlying profit in the first half more than doubled and said it is confident of further development potential in the office market in Beijing and Shanghai.

Photographer: Kevin Lee/Bloomberg

A visitor looks at models depicting the future development of Shanghai at the Shanghai Urban Planning Exhibition Center in Shanghai. Close

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Photographer: Kevin Lee/Bloomberg

A visitor looks at models depicting the future development of Shanghai at the Shanghai Urban Planning Exhibition Center in Shanghai.

Office rents in China’s major cities will continue to grow as office supplies in central areas of these cities are gradually declining, according to Cushman. Total office supply will be less than 1.55 million square meters (16.7 million square feet) in core areas in Beijing until 2016, while those in the city’s emerging areas will climb to 3.6 million square meters, it said.

To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at bcao4@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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