Page 93 - ar2012

6. Vacancy Rate
The vacancy rate has been declining in past years due to the
strong market demand. Most of the new supply of Zhangjiang,
Jinqiao and Caohejing were fully absorbed within 1 or 2 years
from the time they were put up for lease in the open market.
With the economy recovery since 2009 and limited land supply
for business park space in key locations, the annual demand
has been exceeding annual supply which should result in
healthy market growth with broad market vacancy on declining
trend in the near term.
7. Rental
Rental growth is in line with the increasing occupancy rate.
The market rental rates since 2005/2006 were generally on an
upward trend saved for slight decline in 2007 due to surge in
supply in that particular year . As the trend of consolidation
by MNCs continues, the supply of prime and well located land
will continue to diminish further and small to middle sized
companies are sidelined to having to put up in higher rent
facilities due to lower bargaining power and rising overall
development costs of developers. As such, it is reasonable
to expect further increase the rental rates in the coming years
though the magnitude of rental growth may track the overall
economic sentiment and performance.
Due to the fnancial crisis in the following two years, a number
of projects were delayed due to a negative market outlook by
developers. This led to a continued lower supply from 2008 to
2010. As the economy recovered in 2010 and 2011, demand for
space picked up and development activities recovered along
with the macroeconomic trend resulting in a greater market
supply in 2011.
In term of total supply by location, Zhangjiang is still the most
infuential and largest sub-market (38.6%) in Shanghai in terms
of area and number of projects, followed by Caohejing (22.3%)
and Jinqiao (9.5%).
5. Demand
The demand for business park space has been growing steadily
in the recent years. Zhangjiang, Jinqiao and Caohejing sub-
markets played a pivotal role, accounting for up to 70% of the
total market absorption.
As business cost continues to escalate in central business
district and government’s directions towards higher value-
adding industries such as telecommunications, software
development, bio pharmaceutical, cultural and innovation,
continual demand for business parks space in Shanghai should
be sustainable.
In addition, the consolidation of functions & business space in
multiple cities by multi-national companies (“MNCs”), such as
MSD and Nike into Shanghai has further increased the demand
for business park space which features more appropriate
design & layout and building effciency to suit consolidating
functions such as R&D, design, administration, backup offce,
HR and fnance.
INDEPENDENT MARKET STUDY (BEIJING & SHANGHAI)
BY JONES LANG LASALLE
Shanghai Business Park Sub-Market Market Stock Breakdown
ZJ
JQ
CHJ
SB
LK
YP
PJ
ZY
WGQ
1,583,803
390,033 914,243
347,238
38.6%
9.5% 22.3%
8.5%
255,174
131,021
180,513
269,000
33,000
6.2%
3.2%
4.4%
6.6%
0.8%
Shanghai Business Parks Historical Supply, Demand and Vacancy Rate
Supply (‘000 sqm)
Demand (‘000 sqm)
Vacancy Rate (‘000 sqm)
50.0%
60.0%
70.0%
40.0%
30.0%
20.0%
10.0%
0%
100
200
300
400
500
600
700
800
900
1,000
0 2005 2006 2007 2008 2009 2010 2011 2012
Q1
66.5%
53.3%
44.7%
37.6%
57.5%
22.9%
14.6%
11.7%
Source: Jones Lang LaSalle
Vacancy Rate
Supply/Demand (‘000 sqm)
93
A DECADE OF ENABLING BUSINESSES