18 February 2019

Realty sector rolling in dough as Shanghai FTZ craze catches on

The unit price of a nondescript office building in Waigaoqiao {外高橋}, Shanghai’s faraway suburban district that is close to virtually nothing but some container berths, can skyrocket almost threefold within just two months to 35,000 yuan (US$5,755) per square meter, a level comparable with that of some Grade A office towers near the city’s bustling Bund area, the 21st Century Business Herald reports.

Thanks to the inauguration of the pilot free trade zone (FTZ), this is hardly a standalone case in Waigaoqiao and other shantytowns along the eastern fringe of the city’s Pudong {浦東} district, where the zone is located.

Recent land auctions in the FTZ’s neighborhood have been feverish – premiums of 130 percent or above no longer raise eyebrows. A plot in a small town called Zhoukang {周康} was sold last month at a premium of 156 percent, setting Shanghai’s second highest record this year.

CB Richard Ellis noted in a recent report that the average office rent in the FTZ and adjacent areas have soared to 4.2 yuan per square meter per day, a jaw-dropping increase from just 2.1 yuan in May. Turnover of office property transactions in August was more than six times the level a month ago, but still, the small and slightly shabby office buildings in the area — most of them were built in the early 1990s — fail to accommodate the large number of domestic and overseas entities rushing to build an early presence in the experimental zone. Some companies were forced to rent warehouses and even vacant factories instead, according to the Shanghai-based Wenhui Bao.

That has prompted many property firms to snap up the remaining sites, either for immediate development to ride the boom or to hoard plots in anticipation of an even fiercer surge.

The lesser-known Yango Group Co. Ltd. (000671.CN) is one of them. The Fujian-based developer made headlines nationwide after it splurged almost 3 billion yuan in September to stock up on commercial and residential plots in the Pudong district; one of the prime sites it captured is reportedly just two minutes’ walk from the FTZ’s administration office.

Homeowners in the FTZ won’t miss the chance either. Shanghai media reports say many of them have hiked the price of their homes by 20 percent.

Yet the realty boom can scald individual speculators who simply wish to get their hands on existing properties and sell them at a higher price. Waigaoqiao has seen a fleet of cranes and excavators deployed across its barren sites since last year, meaning second-hand homes with hefty price tags may attract only a few buyers since many of them probably won’t mind waiting a little bit longer for a fresh round of supply from numerous ongoing developments.

– Contact the writer at [email protected]



EJ Insight writer

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