Investigating the Dynamics of, and Interaction Between, Shanghai Office Submarkets

The Shanghai office market has developed rapidly over the past two decades. As a consequence of this development two, apparently distinct, office markets, i.e. central Puxi district and Lujiazhui district in Pudong, have developed in central Shanghai. This raises the issue as to whether the Shanghai office market can be viewed as a homogenous entity or whether there is imperfect substitutability across office locations within the city. The latter case raises the possibility of the existence of office submarkets. Submarkets have been examined in many papers in relation to housing markets but few studies examine them in relation to office markets. Economic growth could mean that cities in which there might have been one office market may experience spatial change over time and new office markets may develop as a response to demand pressure on the one hand and supply restrictiveness in certain intra_city locations on the other. The rapid growth experienced in Shanghai may have created new office submarkets, central Puxi and Lujiazhui, in Pudong New District. The two markets upon which this paper focuses account for 68% of the total office stock in the city. In order to address the issues identified above, this paper will examine intra_metropolitan rental dynamics in these markets, identify any interrelationships between these markets, and consider whether they form distinct office submarkets.