According to the latest research report from international property consultant Knight Frank, Shanghai’s GDP growth slowed in 2012, with an increase of 7.5% year on year, 0.7 percentage point lower than that in 2011. The residential sector didn’t see any new policies released in the fourth quarter, but authorities continued to reiterate further and stricter enforcement of current policies and restrictions. Shanghai’s traditional retail market is transforming under the weight of e-commerce popularity and fast-fashion brand growth while the office market continues to expand outward from the core CBD areas.
Regina Yang, Director of Research for Knight Frank Shanghai comments, “China’s economy remains relatively strong compared with Western countries. China, in particular Shanghai, is still a focus for multinational companies considering expansion and new business opportunities and therefore demand for commercial and residential properties will remain buoyant. Supported by investors’ strong interest in commercial real estate, commercial prices are set to stay firm. Both office and retail sectors will see significant increases in large-scale transactions.”
The Ministry of Housing and Urban-Rural Construction restated in December that they would be further enforcing current restriction policies in 2013, with restrictions on home purchases and curbs on speculative housing demand continuing into the new year. New luxury residential supply reached 140,000 sq m in the fourth quarter of 2012, a quarter-on-quarter increase of 102%. Luxury home sales decreased, whilst prices remained on an upward trend. The sales volume dropped 5.4% quarter on quarter to 114,000 sq m, whilst the average transaction price increased 10.3% to RMB55,712 per sq m.
Demand for Grade-A office space dropped due to the waning desire to expand or relocate as well as limited budget growth for many enterprises. The average Grade-A office rental dropped by 1.5% quarter on quarter to RMB9.1 per sq m per day, decreasing for the first time since the third quarter of 2009. In the fourth quarter, only one Grade-A office building, namely Verdant Place, was completed, adding 25,350 sq m of office space to the market. Due to limited new supply, the average vacancy rate of Shanghai’s Grade-A offices remained at 5.1%.
Despite the overseas economic malaise and China’s slowing economic growth, retailers’ confidence in the market remained and they continued to open new stores in Shanghai. Ground-floor rents in core retail areas reached RMB54.7 per sq m per day, an increase of 1.7% quarter on quarter and 11.6% year on year. New retail supply in quarter four increased 41% compared with the previous quarter. However, these new malls were relatively small with average mall size less than 100,000 sq m, thus the annual new supply decreased by 44% compared with the previous year.
About Knight Frank:
Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank and its New York-based global partner, Newmark Knight Frank, operate from 243 offices, in 44 countries, across six continents. More than 7,067 professionals handle in excess of US$817 billion worth of commercial, agricultural and residential real estate annually, advising clients ranging from individual owners and buyers to major developers, investors and corporate tenants.
Knight Frank has a strong presence in the Greater China property markets, with offices in Hong Kong, Beijing, Shanghai, Guangzhou and Macau, offering high-quality professional advice and solutions across a comprehensive portfolio of property services. For further information about the Company, please visit KnightFrank.com.cn.
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