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17 April 2024

Industrial sector in Shanghai on an upbeat trend

By Parag Deulgaonkar



Stimulated by the growing land price and strong demand, industrial facilities in Shanghai witnessed an upbeat trend on both capital value and rental.

The average capital value in leading parks reached RMB 3,777 (Dh2,000) per sqm at the end of 2007, going up by 4.3 per cent compared with first half of 2007 and 6.9 per cent year-on-year, according to Colliers International.

Analysing by district, the capital values in Zhangjiang and Jinqiao industrial parks ranked the top 2, at RMB 6,000 (Dh3,059) and 5,600 per sqm respectively. Yet gross yield continued to rise to 8.41 per cent in second half of 2007, up 0.15 percentage point from the

first half.

The rising yield was on the one hand driven by strong rental demand and on the other hand, the higher investment threshold for industrial properties suggested that competition among developers on asking rents may be less fierce compared with other real estate sub-sectors.

Since the Shanghai Government has positioned logistics as a priority industry in its future planning, coupled with Shanghai’s improving soft and hard infrastructure as a regional trade and shipping hub, many industrial property developers strengthened their strategic investment in the logistic market. For example, Goodman and ProLogis, two industrial real estate giants, are striving to expand their business in the Shanghai market.

According to Colliers’ survey on vacancy rate, the average vacancy rate of leading industrial parks declined by 0.75 percentage point at the end of 2007 from six months ago to 2.37 per cent.

Zhangjiang and Songjiang witnessed the lowest vacancy rates at 0.3 per cent and 0.46 per cent respectively. Since there is less room for favourable policies to attract tenants, the industrial parks compete more on amenities, transportation facilities and operational efficiency.

The strong demand for industrial properties from both international and domestic manufacturers continued to drive the average rental up, which reached RMB0.87 per sqm per day in 2007, up by 6.8 per cent compared with first half and 12.1 per cent year-on-year.

Since the implementation of the new land policy by the central government in January 2007, which requires industrial land to be transacted through bidding and auctions, average land price (achieved at auction biddings) has soared by 45 to 60 per cent in Shanghai, the report said.