2006 Survey Results of Office Requirements in

January 18, 2007

- Business growth is resulting in a growing demand for employees and office space. - The preference for better grade office buildings is growing. - Lujiazui, long the home of financial institutions, is becoming a popular office location among non-manufacturing companies.

The “Office Requirements in Shanghai” survey, the annual survey conducted by Mori Building Co., Ltd., was first published in 2004 with the goal of assessing the office requirements trends of multinational firms in Shanghai. The respondents to this survey are senior executives involved in the decision making regarding their firms’ office loca- tion and business set-up in Shanghai. This year the “Office Requirements in Shanghai” survey was distributed to 3,607 multinational firms in Shanghai, and of these 475 responded. The respondents cover organizations of all sizes in all major industry sectors.

□Research Period ： October - November 2006 □Research Sample ： 3,607 multinational firms in Shanghai Canada/USA Austria/France/Germany/Italy/Switzerland/UK/Other EU Nations Australia/Korea/Japan/Singapore □Response ： 475 companies（13.2%）

（Reference） Framework of 2005 Office Requirements Survey in Shanghai - 4,800 multinational firms in Shanghai - 347 (7.2%) companies responded.

Mori Building Co., Ltd. Strategic Planning and Marketing Section, Property Management Division URL http://www.mori.co.jp 2006 Office Needs Report of Shanghai

1 The current state and forecast of business in Shanghai

More respondents, compared to the 2005 business expansion, 84% of non-manufacturing survey, experienced better than expected busi- companies, and 63% of financial institutions. In all ness results in 2006. industries forecasts increased from last year by The state of business during the past year in approximately 10%. Shanghai remains high, with 35% of respondents Forecasts among financial institutions remains experiencing better business than they expected. low compared to the other industries, however, over This compares to 27% the previous year. 3 year the next few years multinational financial institutions business forecasts have remained high for the last are expected to show growing anticipation in reflec- three years since the start of the survey, with 81% of tion of the governmental policy of releasing Chinese respondents anticipating expansion of their yuan retail services. business, an increase of 6% from 2005.

Business forecast over the next three years increased in all industries. 86% of manufacturing companies anticipated

Company’s business during the past year Business expansion plans over the next three years

1% 1% 0% 100% Better than expected 100% Expand 9% 16% 17% 14% As planned 24% 19% Unchanged 80% 80% Downgrade Worse than expected 60% 56% 60% 60% 56% 40% 40% 85% 75% 81%

20% 35% 20% 24% 27% 0% 0% 2004 2005 2006 2004 2005 2006 （N=298） （N=343） （N=469） （N=301） （N=344） （N=475）

Breakdown of companies that expand their business by industry category 100% 86% 86% Manufacturing 85% 78% (2006：N=88) 80% 83% 84% Non-manufacturing 77% (2006：N=273） 63% Financial institutions 60% (2006：N=67） 55% 40%

20%

0% 2004 2005 2006

- 1 - 2006 Office Needs Report of Shanghai

2 Future prospects of Shanghai offices over the next three years

Shanghai offices will play a larger role in Shanghai offices continue to increase the managing the Asia/Pacific Region. number of employees and expand their offices. Currently 56% of the respondent companies said The trend to increase their role in the Asia/Pacific their offices are responsible for their business for region has resulted in 65% of the companies the whole of , 18% for Shanghai City only, responding that they will hire more people, and that 13% for Kato region, and 9% responded they cover more than half of the companies plan to expand their the entire Asia/Pacific rim. Over the next three offices. years, however, respondents who answered they will cover bigger regions increased, especially the companies that cover Asia/Pacific rim show the largest increase from 9% to 14%. Shanghai offices are expected to increase their role in Asia/Pacific region over the next few years.

Business role of Shanghai offices in Asia/Pasific rim

Current（N=473） Over the next three years (N=466)

Asia/Pacific rim Others Asia/Pacific rim Others 9% 4% 14% 4% Shanghai and vicinity 11% Shanghai and vicinity 18% Huadong (East China) 14% Huadong (East China) 13% China 56% China 57%

Employment plan over the next three Office expansion plan over the next three years years

100% 100% 16% 14% 12% Increase 17% Expand 0% 23% 18% 2% 1% Maintain 2% 1% Maintain 80% current level 80% current level 22% 23% 2% 21% Decrease Decrease 31% 29% 60% Undecided 60% 29% Undecided

40% 40% 65% 61% 64% 50% 52% 20% 20% 46%

0% 0% 2004 2005 2006 2004 2005 2006 （N=227） （N=258） （N=467） （N=224） （N=246） （N=466）

- 2 - 2006 Office Needs Report of Shanghai

3 Future office relocation planned for central Shanghai

Companies plan to relocate their offices in Compared to 2005, requirements for better facilities need of more space and better facilities. increased from 17% to 38%, and for better security 19% of the companies plan to relocate their office from 4% to 10%, showing the largest increase. to central Shanghai over the next three years. Com- for more than half of the respondents. Expansion of The demand for higher grade offices the office is seen as the biggest reason to relocate increased, especially among financial institu- their offices, followed by relocating to an office with tions. better facilities and moving to a better location. In all industries, the top two reasons to relocate an office was to expand offices and to relocate to an office with better facilities. Compared to Office relocation plan over the next three Manufacturing/Non-manufacturing industry compa- years nies that plan to relocate to an office in a better Have the plan 8% location and to cut their costs, financial institutions focus more on building grade, emphasizing those Considering 11% with better facilities and status. No plan/intention 45%

In need but not considering 36%

Reason to relocate offices (multiple choice) 80% 63 60% 58 2006 (N=251) 2005 (N=193) 40% 38 31 21 21 20% 13 13 17 15 12 12 10 10 2 7 8 6 2 4 1 2 4 4 3 3 0% To expand the office To decrease the office To integrate offices To lower the cost location/accessibility For better facilities For better building To achieve higher status headquarters company/ new regional To set up a new or representative office To set up a new branch level To highten the security current building Reconstruction of corporate building To purchase/build the Others

Breakdown of reason to relocate office by industry category

0% - 9% 10％ - 19% 20％ - 29% 30％ - 39% 40％ - 49% 50% -

To set up a To set up a Reconstruc- To purchase/ To increase To decrease To integrate To lower the For better For better To achieve To highten new new branch or tion of build the location/ building higher company/ the security Others Industry the office the office offices cost representative current corporate accessibility facilities status new regional level headquarters office building building

Manufacturing 55% 2% 17% 24% 26% 33% 9% 17% 5% 9% 3% 7% 2%

Non-manufacturing 67% 2% 12% 20% 32% 35% 11% 13% 7% 9% 2% 2% 3%

Financial institutions 54% 7% 14% 18% 29% 43% 25% 18% 4% 7% 0% 0% 7%

- 3 - 2006 Office Needs Report of Shanghai

4 Popular area for office location

Lujiazui was cited as the most popular area show the largest increase, which explains that more for an office location. and more companies expect Lujiazui to become the The most popular location for an office location is focus of their business over the next years. Lujiazui (35%), at more than double the rate for the Also office building grade and better infrastructure two next popular destinations, Hongqiao (17%) and show one of the largest increases compared to Nanjing West Road (15%). The popularity of 2005. Recent office building supply in Lujiazui is Nanjing West Road and People’s Square remains expected improve its environment and thus contrib- high, increasing gradually by 1%-2% from 2004. ute to its popularity. Lujiazui shows the largest increase in 2006, with 22% in 2005 to 35% in 2006.

Good area image and growing number of Breakdown of companies who are most interested in Lujiazui by industry category financial institutions are key factors for the 80% popularity of Lujiazui. Manufacturing (2006：N=82) Good area image of Lujiazui was cited as the Non-manufacturing 60% 65％ （2006：N=267） biggest contribution to their business (73%), Financial institutions （2006：N=66） followed by growing number of financial institutions 47％ 48％ 40% 35％ (72%), office building grade (58%), and the 29％ environment with greenery and water (44%). Com- 28％ 20％ 20% 19％ pared to 2005, growing number of financial institu- 16％ tions and growing number of business partners 0% 2004年 2005年 2006年

- 4 - 2006 Office Needs Report of Shanghai

Good area image and growing number of show the largest increase, which explains that financial institutions are key factors for the more and more companies expect Lujiazui to popularity of Lujiazui. become the focus of their business over the next Good area image of Lujiazui was cited as the years. biggest contribution to their business (73%), Also office building grade and better infrastruc- followed by growing number of financial institutions ture show one of the largest increases compared to (72%), office building grade (58%), and the environ- 2005. Recent office building supply in Lujiazui is ment with greenery and water (44%). Compared to expected improve its environment and thus contrib- 2005, growing number of financial institutions and ute to its popularity. growing number of business partners

Business environment in Lujiazui 2006 (N=472) 80% 68 73 72 2005 (N=335) 61 60% 58 47 4144 40% 39 35 33 30 26 22 26 20% 21 19 16 1114 10 7 5 4 4 4 6 1 2 1 0% 2 0 1 0 Area image financial institutions Growing number of clients in the area Growing number of greenery and water Environment with policies Favorable government Business opportunities other potentials Future economic and Better quality of offices Infrastructure environment Good pedestrian offices Proximity to govenment in the area Living support facilities Rent Cultural facilities School Housing Others

0% 0 1 1 0 1 4 4 4 3 2 2 3 4 5 9 9 10 9 10 8 20% 18 12 13 1615 2424 29 40% 29 34 33 42 60% 55 61 80% 2006 (N=464) 2005 (N=317)

- 5 - 2006 Office Needs Report of Shanghai

Office area map of central Shanghai

.(N) gshan Rd Zhon

Yangpu

Shanghai Station

Shanghai Railway Station Xinjian Rd. - Rd.(N) (Planned) Dalian Rd. Tunnel

The Bund Sightseeing Tunnel Don

.(N) gfa Lujiazui Stn. Lujiazui Green Land Century Ave. ng Rd. Henan Rd.(M) Stn. Shanghai People’s square Stn. Bund Yan’an Rd.(E) Tunnel Lujiazui Area Zhongshan Rd

Cen People’s Square Area Shanghai World Financial Center People’s Park Area tra l H Shimen No.1 Rd. Stn. Renmin Rd. - Dongchang Rd. Tunnel (Planned) People’s square ena West Nanjing Road Area n Rd Yuyuan Garden YanAn Rd.(E) . jing Rd.(W) Nan YanAn Rd.(M) Jing’an Temple Stn. Jingan Park Fuxing Rd.(E) Tunnel Zhongshan Park Huanpi Rd.(S) Stn. Fuxing Rd.(E) Central Huaihai Road Area Zhongshan Park Stn. Henan Rd. d. (W) Fuxing Park Rd. tral Huaihai R Century YanAn Cen d. (S) uxing R Changshu Rd. Stn.Central F Tienshan Park

Hongqiao Development Zone Hengshan Rd. Stn. Long

Hongqiao Park

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Zhong Hongqia Rd o R .(S) T shan d. Xujiahui Stn. unnel(Under cons Rd.

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Shanghai EXPO Sites

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