Shanghai is one of the most preferred and sought-after destinations globally for renting office space.
Shanghai with a population of more than 24 million is the largest city in the world in terms of population.
The city has world-class infrastructure as it houses the world’s largest and busiest container port, a vibrant and ever-expanding financial district, two large international airports etc.
Shanghai is the economic hub and driver of the Chinese economy and is also home to a number of international companies who have set up their offices there.
Shanghai’s economy is the largest and strongest in China and the year 2016 witnessed acquisition of commercial office spaces on a large scale by companies which instilled confidence on the growing popularity of Shanghai as a preferred location for renting office space.
Finance and professional sectors still remain the main clients for office spaces in Shanghai, contributing 53% of the total number of transactions done in 2017.
Technology and manufacturing sectors accounted for 12% and 8% respectively of the total transactions while trading enterprises contributed 7%.
Shanghai is undergoing greater development in terms of commercial office spaces and infrastructure which will drive the market for office rentals further.
The financial sector of the city is growing rapidly and it is expected to achieve the global financial market status by the year 2020.
During the next few years, it is estimated that 6.8 million sq. m of additional office space will be available in the core and decentralized markets of Shanghai.
55% of this additional office space will be located in decentralized market locations.
Total of 64.5 million sq. ft. area of office space was absorbed in Shanghai in 2017-the strongest absorption rate in the last 6 years.
These figures establish the credentials of Shanghai as a highly preferred destination for setting up offices by the leading international business corporations.
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Average Cost of Office Space
The average office rental in Shanghai varies by the location. At the end of 2017, the average rent for the CBDs in Shanghai was RMB 10.21 per sq. m (ppm) per day.
The corresponding figures for Puxi were RMB 9.14 ppm per day. Pudong, the posh location for offices had slightly higher rentals at RMB 11.79 ppm per day.
Among the submarkets, Lujiazui had the highest rentals at RMB 12.5 ppm per day.
The environment and the market for office investments in Shanghai remain robust with thirty-nine deals in 2017 amounting to RMB67.6 billion disclosed during the year.
As the financial sector of China continues to become more liberal, the demand for office spaces in Shanghai is highly likely to be firm over the next few years.
Considerations for Renting Office in Shanghai
Selecting an office in Shanghai is can be a difficult task considering the wide range of options available for office spaces.
Companies need to carefully consider different aspects for narrowing down on and selecting the ideal office space for themselves.
An office is not only a premise where the business operates from, but it is also the identity and brand value of the company.
A good office premise can enhance the brand value of the business and enhance their visibility considerably.
It can also create a better working environment and efficiency among the team.
Some of the most important considerations while selecting office space in Shanghai are discussed below:
Decide the Office Type
The first step towards renting an office is to decide the type of office needed by the business.
There are different office types in Shanghai which may be suitable for specific businesses and the budget.
If budget is a constraint then the companies can choose basic interior offices which have all basic amenities and are a cost-effective rental option.
They can also explore the possibility of renting a co-working office space. This saves considerable cost and provides an ideal working environment for startups and new companies.
Larger companies can opt for renting office suites. These office spaces are more luxurious and spacious. The office suites provide excellent views and also have a meeting place and organized working desks.
It is important for the companies to be clear on the type of office needed for them which will enable them to acquire the perfect office space for them in Shanghai.
Selecting Office Based on Business
Office rentals are long-term agreements and so before entering into the same, the companies should evaluate their business requirements of the present and near future.
Once an office has been selected it is neither feasible nor recommended to keep relocating the office due to change in some business conditions or parameters.
A thorough examination of various business parameters like the growth of the business, preferred work settings, the type of work the office space will be used for, number and type of staff expected etc.
will help businesses to decide the type of office needed. They can determine the office type and the ideal size of office based on the assessment of above-mentioned business parameters.
Check the Surface Area
Along with the type of office, the size of the office space is also an important factor to consider before scouting for and finalizing an office in Shanghai.
The rentals are expensive in Shanghai which further necessitates finding an optimally sized office. Ideally, the businesses should not opt for a bigger office than what is needed as it will put unnecessary financial liability on them.
It is always prudent and recommended to start with a smaller office and keep increasing the office space as the business grows and scales up.
Finalizing a perfectly sized office space will lead to increased savings and add to the bottom line of the business.
Another important consideration is a clear understanding of space measurement metrics. Space can be measured in varying units by location or differing landlords.
Different measurement units like Sq. ft./Sq. m/tsubo etc. can be used which can create confusion.
It is critical that the exact area being rented and the differences between the lettable area, carpet area, surface area etc.
should be clearly understood by the companies before entering into a rental agreement and paying.
Verify the Pricing and the Terms
When finalizing the office space, the businesses should carefully study the pricing structures and the terms of rental.
They can compare the prices for similar spaces in nearby commercial spaces also.
Taking multiple quotes for office rental is also a good practice and will help to narrow down to the best-priced rentals in Shanghai.
The pricing should be transparent and all-inclusive for services offered and should not have hidden costs.
In addition to the pricing, the terms of the rental should be studied also. The inclusions and exclusions in the rental should be clearly understood before finalizing the office space.
Different elements like consumables, office furniture, refreshment, internet and communication, admin support, reception, parking etc. should be carefully understood and whether they are included in the rental or not.
Once the rental has been finalized, the companies should not be asked to shell out more for services later.
Additional Space Available for Expansion
Office space is generally not a short-term commitment. No business likes to relocate their offices frequently as it is a tedious task and it becomes difficult for their customers to keep track of new addresses regularly.
It can also mean more cost and even loss of business for the companies if they relocate their offices often. The office space should be future proof in terms of expansion.
The additional office space available at the premises should be considered before finalizing the office.
When the business grows, the companies can hire additional office space in the same complex or premises which will be convenient for them compared to renting a new office space again.
The office space should not be selected in a hurry. It is important to carry out thorough due diligence before finalizing an office in Shanghai.
It is a recommended and best practice to analyze at least 3-4 suitable alternatives before zeroing in on the ideal office space.
While analyzing the different options parameters like suitability of the office for the business, rental, services offered, a period of the agreement, other amenities, suitability for future expansion etc. should be evaluated.
They can also collect quotations from multiple leasing agencies and compare them for suitability.
This due diligence process will ensure that companies are able to select the best possible premises for their office in Shanghai.
Cost Should not be Sole Criteria
When evaluating the different office space alternatives, a cost sometimes becomes the single most important criteria for selecting the office.
This should not be so as there are many other important non-monetary factors which should be considered before finalizing the office space.
The suitability of the office space and its impact on factors like corporate identity, branding, worker’s productivity, and communication, etc. should be assessed.
In the current competitive business environment, companies should look beyond the traditional cost criteria for renting office space.
They should do an in-depth analysis of the suitability of the office architecture on their overall business operations.
It should contribute to the development of team morale, team networks, and organizational learning systems.
The office space should enhance the efficiency of the team members and help to build the business and brand.
Always Have Written Agreement
There are instances where the companies take office spaces on rent after verbal discussions and negotiations with the landlord.
It may be done due to the urgency of closing the deal and sufficient mutual trust between the landlord and the company representatives.
Many of the clauses and terms of the rental agreement are not incorporated in the agreement and is mutually agreed upon on the basis of oral negotiations.
This is not the recommended mode of agreement between the company and the landlord. It has room for ambiguity and can lead to conflicts and difference of opinions later.
Hence, to avoid such confusions and potential conflicting situations, it is always recommended to have a written agreement between both the parties which will eliminate any ambiguity in the rental agreement.
Popular Locations for Office Premises in Shanghai
There are many popular locations for renting office spaces in Shanghai. These locations are the most sought-after by companies for setting up their offices.
Details of the most preferred locations for renting office spaces in Shanghai are provided below:
Pudong is a very popular location for renting office space in Shanghai. It is known as “The Pearl of the Orient” locally and represents the cosmopolitan and urban aspect of China.
It has mostly offices of finance companies, shipping and trade centers. Pudong is located east of the Huangpu river across the popular city center- Puxi.
The infrastructure in Pudong has developed considerably in the last few years and has developed more than 1000km of the transportation network.
Pudong is emerging as a major hub for offices of international corporations considering its world-class infrastructure and availability of office spaces.
Puxi is the city center for old Shanghai located on the western side of the river Huangpu. It is a densely populated urban location in Shanghai.
Popular sub-districts in Puxi include Xujiahui, Luwan, and Jing ‘an. It continues to remain a popular location in Shanghai for renting office spaces.
It is also more economical and has lower office rentals than Pudong which is the more modern and swankier of the two locations.
Puxi has an abundant supply of additional office space and the new office space is expected to grow by 2.3 million sq. m by the year 2020.
Lujiazui is an important location in Pudong district and is home to modern and well-equipped office spaces.
The location is the hub of the financial sector in Shanghai and is preferred by most of the financial institutions.
It is home to offices of some of the largest financial institutions and insurance companies in the world with offices of more than 500 such companies.
It boasts of the skyline with multistory buildings which have adequate office spaces.
The location has an excellent infrastructure which is also a major driver of the office rental market.
The area is also popular for being home to the Shanghai stock exchange