Savills World Research Shanghai Spotlight Savills China City Series - Shanghai May 2013 savills.com.cn/research savills.com.cn/research 01 Briefing |Savills China City Series - Shanghai May 2013 Savills World Research Shanghai Spotlight Savills China City Spotlight Series - Shanghai May 2013 Savills China City savills.com.cn/research Series - Shanghai savills.com.cn/research 01 City overview 3 City development planning 3 Office Market 4 Retail Market 6 Residential Sales Market 8 Residential Leasing Market 9 Hotel market 10 Appendix 11 savills.co.uk/research 02 Briefing |Savills China City Series - Shanghai May 2013 City overview The city plans to focus on the devel- FIGURE 1 Shanghai is located on the Huangpu opment of its finance, shipping, trade Shanghai's location River, a tributary of the Yangtze River and other emerging industries as the which is the main link between cen- pillars of the city’s economy going tral China and the sea. The city cov- forwards. ers a total area of 6,341 sq km, and is composed of 16 districts and one Following 16 consecutive years of county. At the end of 2011, Shanghai double-digit growth, Shanghai’s 2008 had a total population of roughly 23.5 GDP growth fell to less than 10.0% million people, including non-regis- as a result of the global financial tered long-stay residents. Shanghai crisis. By the end of 2011, Shanghai’s is one of China’s most densely popu- GDP per capita rose by 5.0% in real lated cities, with an average popula- terms, to RMB82,560 (US$12,800). tion density of 24,254 people per sq km in downtown districts. Even when Transportation including the inner suburbs, with an Intercity average population density of 6,956 Airport per sq km, this is comparable to To- Shanghai is the first city in China with kyo (around 7,000 people per sq km), two airports – Hongqiao and Pudong Source: Savills Research and far exceeds that of Paris (3,540 International Airport. In 2011, the FIGURE 2 people per sq km) and London (4,760 airports handled 74.56 million person people per sq km). times, 3.54 million tons of cargo and Shanghai’s administrative divisions 574,000 planes. Recently, Shanghai The most recent national census has begun offering 72-hour visa-free (2010) shows a clear trend of devel- stays for citizens of 45 countries opment moving towards the suburbs. transiting through China to a third Five downtown districts recorded country. a population decline of 300,000, while seven decentralised districts Seaport (Songjiang, Minhang, Jiading, Qin- The port of Shanghai is China's major gpu, Fengxian, Pudong, Baoshan) transportation hub. Shanghai over- increased their population by roughly took Singapore in 2010 to become 50% over a ten-year period. The the world's busiest container port. combination of high downtown The port handled cargo throughput residential prices, suburban devel- of over 29.05 million tons, as the city opment, the rapid expansion of the set an historic record, handling over city’s Metro system and rising car 30 million twenty-foot equivalent ownership has been the main driver units in 2011. of this trend. Expressways Shanghai has been at the forefront At the end of 2011, the total length of China’s economic reforms since of Shanghai’s expressways was 806 the early 1990s, and has seen tre- km, with eight national express high- mendous growth over the last two ways and more than ten provincial decades. Whereas the high growth highways. rates achieved in the early 1990s were accompanied by excessive Railways inflation, this has become increas- Shanghai is one of the key points for Source: Savills Research ingly manageable, resulting in a China’s ambitious high-speed railway consistently healthy rate of growth. system plan. The largest railway By the end of 2013, Shanghai plans At the end of 2000, Shanghai had station in Asia, Shanghai Hongq- to have 13 Metro lines in operation, become the first city on the mainland iao Railway station, was opened in covering 500 km, with daily passen- to achieve a per capita GDP of above 2010, reducing the trip length from ger times increasing to 8 million. US$4000 (RMB30,047). The econ- Shanghai to its neighbouring cities omy’s growth has largely resulted Hangzhou and Nanjing to 45 and 73 City development from major infrastructure projects, minutes respectively. planning increased industrial production and Any city that has a population of exports, as well as a continuing influx Intracity 23 million people is going to de- of overseas investment. Since 2010, Metro velop congestion and overcrowding development has focused on estab- Shanghai has the nation’s largest problems eventually. The Shanghai lishing regional headquarters, as well Metro system with a total length in- government, in order to alleviate the as moving away from less-profitable creasing from 63 km in 2002 to 454.1 pressure from the burgeoning popu- manufacturing towards a developed km in 2011, and a passenger volume lation, has come up with a master service industry. of 5.76 million person times. plan that envisages the development of four key subcentres along with savills.com.cn/research 03 Briefing |Savills China City Series - Shanghai May 2013 ten “new towns” each with their own FIGURE 3 industry specialisation Shanghai urban structure of cities and towns, 1999–2020 Key subcentres Xujiahui: Integrated services (high-end business, sport and cul- tural centre) Huamu: Administrative, commer- cial and living centre (international community) Wujiaochang: Science and education Zhenru: Integrated services and also serves the Yangtze River Delta New towns: Chengqiao: Agriculture, tourism Jiading: Automobile Qingpu: Tourism, manufacturing Songjiang: Export, manufactur- ing, education Source: Shanghai master plan, 1999–2020 Jinshan: Chemistry FIGURE 4 Shanghai Metro line network, 2012 Nanqiao: Emerging industries (environmentally friendly) Harbour: Shipping Baoshan: Heavy industry Airport: Aviation Minhang Manufacturing All the new towns are at varying stages of development. Some, such as Jiading and Minhang, have well established cores while others are still undergoing the initial stages of development or have been put on hold. While the government originally envisaged this master plan as the city evolves so the does the planning on the future development. In recent years, a lot of the new development in the city centre has focused on the development of the Huangpu riverside. The Expo site is to be rede- veloped into a headquarter business park for state-owned enterprises Source: Savills Research and leading domestic companies, while further south there is also the the most exciting new area develop- distance bus terminal, and relatively development of Xuhui Binjiang and ments is the Hongqiao transportation close to the city centre. Minhang Binjiang. New develop- hub, which is conveniently located Office market ment areas are not limited to the next to the city’s domestic airport, Market description Huangpu River, however, as one of high-speed train terminal and long- Shanghai at the end of 2012 had savills.com.cn/research 04 Briefing |Savills China City Series - Shanghai May 2013 roughly 5.5 million sq m of Grade A FIGURE 5 office stock. Rents in prime locations Office locations range from RMB9 to RMB10 per sq m per day on average, while non- prime locations range from RMB6 to RMB7 per sq m per day on a gross area basis. Typical contracts last three years, although it has become more common for large-space an- chor tenants to be allowed to sign for five years, with a rent-free fit-out pe- riod of two to three months. Tenants are typically given the right to renew, with rents to be charged at what are deemed to be market rates. City-wide vacancy rates are below 10% despite substantial supply pres- sure, as much of the new supply is focused on decentralised locations and business parks. Shanghai’s ten- ant profile has shifted in recent years, increasingly favouring domestic tenants. End-user purchases and strata-title developments have also become more common. In 2012, Source: Savills Research rental growth was just above 10%, while gross reversionary yields were Wheelock, Kerry, Hang Lung, Hutchi- of Pudong New Area and arguably roughly 5.0% to 5.5% and capital son Whampoa, Wharf, CITIC and the city as a whole. The area enjoys values ranged from RMB50,000 to Swire, making this area a major office the city’s highest office building RMB80,000 per sq m. centre. Nanjing Road (W) is also density and accounts for approxi- home to some of Shanghai’s most mately a third of all Grade A office The next few years are expected to prestigious retail malls, department stock in Shanghai. Tax and business see substantial new supply entering stores and high-end hotels. In fact, incentives introduced in the late the market, forcing up vacancy rates, the abundance of such supporting 1990s attracted banks and financial especially in the Puxi market and facilities has led Nanjing Road (W) services firms to this submarket dur- particularly in non-prime locations. to re-establish itself as arguably the ing the early stages of development. As vacancy rates rise, rental growth most important business district in The market has now substantially is expected to slow and could start the Puxi area. Relatively new sup- matured and is a must-have address to record falls within the next three ply is predominantly focused on for not only financial firms but also years, should supply enter the market the Jing’an Temple area, which has companies in ancillary services, such as forecast. become an extension of the Nanjing as business and legal consultants, Road (W) commercial centre.