Shanghai Real Estate Company to Sell Most of its Office Buildings as Market Slows Down
According to sources, a large state-owned real estate company in Shanghai is planning to sell most of its office buildings at a price of at least 30 billion Chinese yuan (approximately 4.1 billion US dollars), highlighting the severity of the slowdown in Shanghai’s commercial real estate market.
On Tuesday, Bloomberg quoted sources as saying that Shanghai Lujiazui Finance & Trade Zone Development Co., Ltd. (“Lujiazui Development Company”) proposed last month a plan to sell approximately 20 office buildings located in the financial center of Shanghai.
Public data shows that Lujiazui Development Company is a subsidiary of the State-owned Assets Supervision and Administration Commission of Shanghai Pudong New Area.
According to Bloomberg, sources revealed that the office buildings planned to be sold include the well-known DBS Bank Tower, which will be sold individually without requiring buyers to purchase them as a whole package.
Sources added that these are preliminary plans and may be subject to change. Many of the office buildings to be sold are located in Lujiazui Financial District, which is home to the largest group of bank tenants. Some are also located in the Bund area, where many state-owned enterprise headquarters are situated, once a thriving commercial district.
The challenging commercial real estate market in China is prompting institutional investors and owners to cash out in major cities.
Earlier this year, Bloomberg reported that global asset management company BlackRock Inc. attempted to sell an office complex in Shanghai with a discount of about 30% below the purchase price.
Data from CBRE Group shows that the office vacancy rate in Shanghai rose to 20.9% in the first quarter, the highest in nearly twenty years.
According to data from leading real estate services provider Cushman & Wakefield, due to an oversupply of Grade A office spaces, rents have fallen to the lowest level in nearly a decade in Shanghai. Cushman & Wakefield recently forecasted that the rising vacancy rate over the next 12 months will continue to drag down rental prices.
This sale marks a rare strategic shift for Lujiazui Development Company.
According to Bloomberg, in its annual report on Monday, Lujiazui Development Company stated that the Shanghai office leasing market will be in a “long-term adjustment,” and “a massive supply will intensify market competition as never before.”