briefing residential leasing august 2014 · apartments 165.8 -0.0 0.0 86.8 -0.4 -1.0 villas 154.8...
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savills.com.cn/research 01
Briefing Residential leasing August 2014
Savills World Research Shanghai
SUMMARYOnly one new serviced apartment was launched this quarter allowing the market to continue absorbing some of the oversupply witnessed between 2010 and 2012.
One new project was released onto the market this quarter. The Savills Residence Hongqiao held its grand opening in Q2/2014, adding 78 units to the serviced apartment market.
Overall residential rents fell 0.7% in Q2/2014 to an average of RMB180.6 per sq m per month, down 1.1% year-on-year (YoY). City-wide occupancy rates fell 0.5 of a percentage point (ppt) quarter-on-quarter (QoQ) to 88.9%, up 0.2 of a ppt YoY.
Overall villa rents fell 1.6% QoQ to RMB154.8 per sq m per month, with luxury villas falling a significant 3.3% QoQ, down 4.0% YoY to RMB171.4 per sq m per month. City-wide villa occupancy rates fell 0.5 of a ppt QoQ to 93.6%, still up 1.3 ppts YoY.
The serviced apartment market was one of the only markets to show an increase in rents this quarter rising 0.5% QoQ, but down 0.1% YoY. City-wide occupancy rates fell 0.7 of a ppt QoQ but remain up 1.4 ppts YoY.
“The slack from slowing multinational corporation (MNC) demand has been picked up by growing demand from a domestic audience and shorter-term stays.” James Macdonald, Savills
Research
Image: IFC Residence
02
Briefing | Shanghai residential leasing August 2014
Market overviewSluggish demand was carried over from last quarter, with many long-term tenants opting to return home and fewer expatriates relocating to Shanghai amid air pollution concerns. Slowing economic growth in Shanghai and other first-tier cities, as well as growing business opportunities in second-tier cities have led to a trend in expatriates now accepting secondments in other parts of China.
Overall residential rents fell 0.7% QoQ and remain down 1.1% YoY at RMB180.6 per sq m, while city-wide occupancy rates fell 0.5 of a ppt QoQ
but remain up 0.2 of a ppt YoY at 88.9%.
Serviced apartment market overview1
Due to the continuing quiet season, many serviced apartments are offering promotional summer campaigns in an effort to boost occupancy rates.
Only one new serviced apartment was launched this quarter allowing the market to continue absorbing some of the oversupply witnessed
1 Rents quoted are only for stays of longer than one year, and as such, actual transacted rents may be lower leases of short- and mid-term stays of less than 12 months.
GRAPH 1
Residential leasing market occupancy rate and rental index, Q1/2003–Q2/2014
Source: Savills Research
between 2010 and 2012. Slowing demand from MNCs has picked up by growing demand from a domestic audience and for shorter stays. Certain areas, such as Lujiazui, are seeing more diverse tenant profiles, in terms of family size, nationality and lease term. Several projects are registering close to equal numbers of expats and locals.
City-wide serviced apartment rents were down 0.5% QoQ to an average of RMB220.8 per sq m per month this quarter, down 0.1% YoY. Occupancy rates were down 0.7 of a ppt QoQ but were still up 1.4 ppts YoY at 87.0% city-wide. Both Puxi and Pudong serviced apartment occupancy rates fell 0.6 of a ppt and 0.9 of a ppt QoQ to 86.4% and 87.6% respectively.
Strata-title apartment market overviewAfter a period of rental growth and increased demand for larger strata-title apartments, demand may be stabilising which has allowed rents to remain relatively unchanged in Q2/2014. Low occupancy rates can be attributed to a traditional quiet season and many secondees opting to re-expatriate.
There has been an emerging trend of trailing spouses and families returning to their home countries with only the assignee remaining in Shanghai for the remainder of their contracts. This could potentially affect demand for larger strata-title units as secondees opt for smaller units which offer shorter term leases. Consequently, competition between strata-title projects and serviced apartments is expected to heat up.
City-wide strata-title apartment rents rose 0.1% QoQ and were up 0.9% YoY to an average of RMB168.0 per sq m per month. Occupancy rates were down 0.4 of ppt QoQ and fell 1.0 ppt YoY to 86.8% city-wide.
Villa market overviewWith MNCs still concerned over slowing economic growth and families hesitant to relocate to China due to continuing concerns over pollution and standards of living, we may see a drop in occupancy rates Source: Savills Research
GRAPH 2
Serviced apartment occupancy rate and rental index, Q1/2003–Q2/2014
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savills.com.cn/research 03
August 2014Briefing | Shanghai residential leasing
for villas in the vicinity of international schools. This dip in occupancy can also be attributed to the fact that expatriates may be opting to return to Shanghai for shorter secondments and are therefore signing shorter leases.
Although the quiet season has allowed occupancy rates to fall 0.1 of a ppt and 1.0 ppt QoQ in Puxi and Pudong respectively, city-wide villa occupancy rates remain up 0.2 of a ppt compared with the same period last year. Overall villa rents fell 1.6% QoQ in Q2/2014, down 2.6% YoY to RMB154.8 per sq m per month.
Market newsChina Garden Serviced ApartmentChina Garden Serviced Apartment recently completed a period of renovations and returned 84 units to the serviced apartment market. Upgrades include a laundry service, gated entrances to each building to ensure privacy and clubhouse
Source: Savills Research
TABLE 2
Strata-title apartment, serviced apartment and villa indicators, Q2/2014
Rent (RMB per sq m per month) Occupancy (%)
Q2/2014QoQ
change (%)
YoY change
(%)Q2/2014
QoQ change (ppts)
YoY change(ppts)
Serviced apartments
220.8 +0.5 -0.1 87.0 -0.7 +1.4
Strata-title apartments
165.8 -0.0 0.0 86.8 -0.4 -1.0
Villas 154.8 -1.6 -2.6 93.6 -0.5 +1.3
Source: Savills Research
TABLE 1
Selected strata-title apartment, serviced apartment and villa transactions, Q2/2014
Project name Type AreaGross
unit size (sq m)
Unit price(RMB per
month)
Lease start
Lease term
(months)
Grand Gateway
Serviced apartment
Xujiahui 145 24,000 Apr 12
Skyline Mansion
Strata-title apartment
Lujiazui 227 30,000 Jun 12
Shimao Riviera Garden
Strata-title apartment
Lujiazui 283 36,000 May 12
Contemporary Spirit
Villa Minhang 360 40,000 Jun 12
Fraser Residence
Serviced apartment
Huangpu 253 53,000 May 12
facilities. Units range from 38 sq m to 147 sq m with a price range of RMB10,000 to RMB28,000 per month.
Shanghai American HomesShanghai American Homes, located in Changning district, is expected to close for a renovation period in Q3/2014. The project, launched in 2000, boasts 73 units and shares facilities with Xijao Guest House. The length of the renovation period is currently unknown.
Market outlookTwo new internationally branded serviced apartments, Aroma Garden Serviced Suites in Huangpu and Ascott Hengshan in Xuhui district, are expected to be launched in the remaining two quarters of 2014, adding 169 units to the serviced apartment market.
One new international school, Wellington International School,
is expected to open in the third quarter. Located in the Pudong New Area, Wellington will be the first international school to offer a boarding option. Linked with Wellington College in the UK, the school will follow the British Curriculum and will be the first of its kind in Shanghai.
Demand from MNCs is expected to remain flat to weak for the rest of the year. Companies are placing more focus on streamlining, maximising efficiencies and defending profit margins in their current business rather than aggressively expanding their revenue base at the cost of profitability.
Looking forward, demand is expected to remain stable, with an increase from domestic tenants compensating for slowing demand from MNC expatriates.
Source: Savills Research
GRAPH 4
Villa occupancy rate and rental index, Q1/2003–Q2/2014
Source: Savills Research
GRAPH 3
Strata-title apartment occupancy rate and rental index, Q1/2003–Q2/2014
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Briefing | Shanghai residential leasing August 2014
Project focusAroma Garden Serviced Suites (Lanson Place Luxiangyuan)
Aroma Garden Serviced Suites, located in close to one of Shanghai’s most prominent commercial districts – the Huaihai Road central business district – will be developed in two phases comprising primarily high-end residential units and supporting commercial facilities. Lanson Place will be responsible for the management of the project’s Serviced Residences, which will offer 79 serviced apartment units of between 60 sq m and 300 sq m, a gym and a breakfast lounge.
Location 1 Luxiangyuan Road, Huangpu district
Owner Shanghai Chengtou Holding
Operator Lanson Place
No. of buildings 1
No. of units 79
Transport links
30 minutes’ drive to Hongqiao International Airport
2 minutes’ walk to the nearest Metro station (Yuyuan, line 10)
Expected handover date 2H/2014
TABLE 3
Aroma Garden Serviced Suites (Lanson Place Luxiangyuan)
Source: Savills China Research
Definition: Unless otherwise stated, rents refer to one-year rents of 150-sq m two-bedroom units in the mid-zone of residential towers unless unavailable, in which case the standard unit size for the development is used.
Please contact us for further information Savills Research Savills Residential Leasing Savills Residence
Savills plcSavills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 500 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East.
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James MacdonaldDirector, China+8621 6391 [email protected]
Dawn BrandenburgDirector+8621 6391 [email protected]
Cindy XuAssociate Director+8621 6391 [email protected]
Neil HarveyDirector+8621 6391 [email protected]