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Knight Frank: TMT to become the key driver of Shanghai’s future development
By:Jiang Wenran  |  From:english.eastday.com  |  2016-11-10 10:01

(Photo: Fan Yicheng)

Shanghai, November 10- Knight Frank, the leading international property consultancy, today launches Global Cities: the 2017 Report which examines the real estate performance of 34 global cities.

The report identifies three key global trends that will affect the real estate market and global city competitiveness.

First, negative interest rates have reduced investors’ expectations on what constitutes an acceptable return, which is drawing capital towards real estate.

Second, despite the volatile economic environment, the avalanche of technological innovation continues to drive demand for property on a global scale.

Third, fast-growing cities are centre stage in the digital and creative revolutions, and in many of those at the forefront, supply is not keeping pace with demand for both commercial and residential real estate.

As for the Skyscraper Index examining the rental performance of commercial buildings over 30 storeys, looking at the performance of skyscrapers in the six months to Q2 2016, Asia-Pacific cities experienced the highest rental growth across the global cities tracked.

(Photo: Fan Yicheng)

David Ji, Director and Head of Research & Consultancy of Greater China at Knight Frank, says “as home to the largest cluster of super tall buildings in mainland China and the tallest skyscraper in the region (Shanghai Tower) – Shanghai’s skyscrapers saw the strongest rental growth rates over the first six months of the year.”

Skyscrapers in Shanghai recorded the strongest rental growth in the first half of 2016, at 7.6%, followed by Sydney (6.6%), Hong Kong (5.9%) and Taipei (5.7%). While Singapore sits at the bottom of the chart with a decline of -7.0% attributed to significant new supply and a slowdown in the local economy.

As for Grade-A office performance, rents and supply, Grade-A office rents in Beijing, Shanghai, Guangzhou and Taipei are expected to decline or grow slowly with abundant supply.

In Q3, the overall Grade-A office vacancy rate in Shanghai slightly increased to 3.7%. Financial institutions and technology companies were active in the leasing market. Co-working operations continued to flourish in Shanghai.

The booming TMT sector will become the key driver of Shanghai’s future development, thus the demands in human resources and office space will continue to grow. Knight Frank estimates that TMT companies will occupy approximately 15% of Shanghai’s total office stock by 2020, becoming a key driver in the market.

There has been a significant upward trend in mainland firms making en-bloc office purchases in Hong Kong over the past few years despite the city’s low yields and high entry costs. Going forward, Mainland Chinese firms entering Hong Kong will be the key demand driver.

(Photo: Fan Yicheng)

Of the global cities analysed, 12 are in the Asia-Pacific – a region continuing to grow in economic importance globally. However, the prime office rents forecast from Q4 2015 to Q4 2019 show a huge range of future performance prospects:

Asia-Pacific markets show a huge range of prime rent growth prospects. Sydney is projected to see the strongest growth at 27.5%. Singapore is forecasted to experience the strongest decline in the region at -14.0%.

Kuala Lumpur and Beijing are also expected to experience negative growth at -1.1% and -4.4% respectively. Shanghai (19.2%), the only Chinese city on the top 10 chart, sits in the sixth position, a notch down from Melbourne (19.3%).

David Ji says “to hedge against the risk of further rental rises, many mainland companies are looking to purchase offices for their own use, including setting up regional headquarters.”