An Econometric Analysis Of Shanghai Office Rents

Modern commercial office market in Shanghai emerged with Chinaís economic reform and open door policy in the 1980s and grew fast at the beginning of 1990s, with increasing demand for office space from foreign and domestic occupiers. Though total real estate investment is skewed towards residential property, office investment has grown by 23% per annual in terms of value and by 24% per annum in terms of completed floor space from 1995 to 2006. The Shanghai office market is of importance for a number of reasons. First, it is one of the largest office markets in China in terms of square footage and in investment terms. Second, the office market is one of most established ones in China and attracts most attention from the policy makers, investors, practitioners and academia. However, so far there is little empirical research on Shanghai office market. This paper will use econometric modelling techniques to investigate office rent determination of the CBD in central Puxi area, Shanghai, over the period 1992 ñ 2006. Using a reduced form mdoelling specification based on demand and supply interactions, changes in office stock and interest rates are found to be the most important determinants of short run dynamics of office rental change in the Shanghai market.