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Friday, February 20, 2009

Shanghai’s industrial property fast losing shine

KUALA LUMPUR: Shanghai’s industrial property is fast losing its shine as the manufacturing sector bears the brunt of weakened demand, renminbi appreciation and rising cost of operations.

With the average price of industrial properties moving south, gross yields are expected to rise to around 10% this year.

While the government’s value-added tax (VAT) reform from production-based to consumption-based this year will stimulate investment, the impetus will be constrained by weak demand in the near term, said Hingyin Lee, the director of research and advisory of Colliers International, East China division.

Lee sees demand for premium quality warehouses and build-to-suit workshops staying firm. More companies will opt for the sale-and-leaseback model to reduce risk.

The vacancy rate in major industrial parks will hover at a low level. Average rentals are expected to be sustained by a relative scarcity in supply of high-quality warehouse facilities, said Lee.

DHL has decided to build a North Asia hub in Shanghai Pudong International Airport. This comes on the heels of the opening of a new international hub at the airport by UPS.

Meanwhile, the average rental of office buildings in business parks will be pressured from new supply coming onstream and a marked rental dip in the Grade A office market.

By The EDGE Malaysia (by Au Foong Yee)

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