July / August

NEWSLETTER

Table of ContentsMarket Insight – Shanghai’s Creative Industry ParksThe SceneProperty Snapshots – SWFC, Platinum, The PlaceEvents – Watery Art, Moving Silence and 3D MattersRestaurant Suggestions – Naked BiteSofia Group News – Our New OfficeMarket Notes

Helping you to find and design the office you want.

Call us at 021-6230 1919 www.sofiagroup.com

Creative Industry Parks in ShanghaiThe emergence of creative industry parks (CIPs) in Shanghai has been one of the most visible trends in the local commercial real estate scene over the past fifteen years, and in many ways it has been a most welcome trend. CIPs have transformed ugly old industrial buildings into some of the city's most vibrant and aesthetically pleasing sites for work and play. However, the failure of some CIP developers to understand and address the needs of their creative company tenants has also resulted in high vacancy rates in some of these developments, as well as occupation by non-creative enterprises.

The following brief background on the growth of Shanghai’s CIPs, the challenges they face and rents that some are currently charging might be useful to firms seeking a suitable creative workspace.

Beginnings

The Taiwanese architectural designer Chen Kunyan is widely credited as being the first person in Shanghai to transform an old industrial property into a space for creative work. His project, a warehouse beside the Suzhou River that he remade into a beautifully chic design studio, received considerable coverage in local media when completed in 1999. Other local creative industry leaders began to transform old buildings into charming and inexpensive workspaces for their own firms.

The city's first creative industry parks were not really 'parks', a word that implies an official government designation. They are better described as 'creative industry clusters', and they arose naturally as solutions to meet the needs of two parties: the creative enterprise, which needed inexpensive work and retail space; and the defunct industrial building owner, who needed to find tenants for space that was not in high demand.

The first two creative industry clusters in Shanghai were art-focused: Tianzi Fang by Taikang Road, which emerged around the end of 1999, and M50 on Moganshan Road, which officially opened about a year later.

Some of the well known clusters that came next were Bridge 8 on Jianguo Road in 2004, and The New Factories ( 同 乐 坊 ) in 2005. Compared to Tianzi Fang and M50, these two new projects had a more commercial and planned character, and sought to attract elite creative industry companies and retail brands.

Around the same time there emerged creative industry clusters with less retail space, and a stricter industry-mission focus that suggested a government role in their development. Examples included the Design Factory, which opened in 2005 at the intersection of Hongcao South Road and Caobao Road, and EP 700 on Huangpi South Road.

The Scene

Development Challenges

2005 was also the year that city government officially took on the role of regulating and promoting creative industry clusters, which henceforth would be called creative industry parks (CIPs). Being designated as a CIP allowed owners of old industrial buildings to charge higher commercial rents without obtaining a rezoning of their property and paying associated fees. This possibility of charging higher rents naturally sparked the interest of developers, and the number of new CIP projects under development exploded.

As noted in the first paragraph above, many real estate developers that involved themselves in these projects failed to understand the nature and needs of their creative industry tenants. They often had unrealistic expectations about the rents these tenants could afford. Some failed to design workspaces that appealed to creative tastes. And unlike the way Tianzi Fang and M50 slowly evolved in organic fashion, giving their creative tenants time to work with their landlords on how their facilities were used and how their overall project was positioned, these latter CIP projects would open all at once as finished developments without the benefit of tenant input.

Vacancies and occupation by non-creative firms became widespread as a result of these issues. In 2012, two scholars conducting a survey reported that of 60 CIPs they visited in Shanghai, "at least 30, especially those in the outlying areas, seemed to be half occupied at best."

Current Situation

A quick survey that we conducted suggests that things may have improved somewhat for many CIPs in the city. At least as real estate ventures, many are thriving and delivering profits to their owners. Some creative firms and people may be unhappy about high rents in certain parks, but the government is at least attempting to alleviate the affordability problem somewhat by promoting development of less expensive incubator workspaces, some situated within CIPs.

The following data we collected shows a sampling of current rental rates at several CIPs, and for a more comprehensive listing in Chinese, you can visit ShanghaiChuangYiYuan.com/. It should be noted that listings on that website include Software Development Parks, which the government somewhere along the line decided to include under its broad definition of creative industry park.

Bridge 8, Jianguo Road, Rental : RMB 7.0-7.5/sqm/day

The Cool Docks, No. 479 South Zhongshan Road, Rental : RMB 5.5-6.5/sqm/day

800 Show, No. 800 Changde Road Rental : RMB 6.0-7.0/sqm/day Tenant: Gap

Red Town, No. 570 West Huaihai Road Rental : RMB 6.-6.5/sqm/day Tenant: Leo Burnett and Hakuhodo

1933 Old Milfun, No. 611 Liyang Road, Rental: Rental : RMB 5.0-5.5/sqm/day

Dream Wharf, No. 1029 Zhongshan South Road, Rental : RMB 5.5-6.5/sqm/day

The New Factories, No. 14 Yuyao Road, Rental : RMB 5.5-6.0/sqm/day

Fashion Loft, No. 283 Jianguo Road, Rental : RMB 6.0-6.5/sqm/day

X2, No. 20 Chaling North Road, Rental : RMB 5.5-6.5/sqm/day Tenant: Tudou wang

Daning Center Plaza, No. 700 Wanrong Road, Rental : RMB 3.5-4.5/sqm/day

China Dream Valley, No. 88 Huaxu Gong Road, Greater Hongqiao, Rental : RMB 1.2 - 2.0/sqm/day

The Place

Shanghai World Financial Center

Platinum

Contact Sofia Group at 021-6230 1919 for further information on the three office building properties listed above, or for information on any other commercial property in the city.

Property Snapshots

Building quality: Grade A

Address: 100 Century Ave

Ceiling height: 2.8 meters

Recommended Floor/Area: 3,300 sqm

Rental/sq.m/day: RMB 15.5

Total Floors: 101

Metro: 10 minutes walk to Metro Line #2 (Lujiazui)

Location: Pudong

Availability: Options somewhat limited

Shanghai World Financial Center

One of the three supertall towers shaping the city skyline, SWFC was built by Japanese developer Mori in cooperation with local enterprises and finished in June 2008. It boasts the world's highest observation deck on its 100th floor, and a Park Hyatt hotel occupies floors 79 - 93. Visit swfc-shanghai.com to learn more about this building, its latest retail offerings and events.

Platinum

Conveniently located beside Xintiandi and a line 10 Metro station, the Platinum building is a minor landmark of the Huai Hai Road CBD that was completed in 2006 by Singaporean developer CapitaLand. The project features modern and elegant architecture and space within leases out at the high end of the Puxi rental range. Since opening in 2006 it has attracted a number of highly reputable tenants including McKinsey and Standard Chartered Bank.

Building quality: Grade A

Address: 233 Taicang RoadCeiling height: 2.7 metersRecommended Floor/Area: 1,680 sqmRental/sq.m/day: RMB 12.5 Total Floors: 25Metro: 5 minutes walk to Metro Line #1,10 (Huangpi South or Xintiandi)Location: HuangpuAvailability: Choices limited

The PlaceCompleted in 2001, The Place, a Hongqiao landmark, unveiled its impressive new retail and leisure street area this year after undergoing a thorough renovation. The makeover will enable The Place to better compete with new developments in the neighborhood such as LV Tower. The development’s completely new Phase III property is scheduled for completion this summer.

Building quality: Grade A

Address: 100 Zunyi Road

Ceiling height: 2.4 meters

Recommended Floor/Area: 1,200 - 1,900 sqm

Rental/sq.m/day: RMB 6

Total Floors: 36

Metro: 8 minutes walk to Metro Line #2 (Loushanguang Road)

Location: Changning

Availability: Spaces available now

Events – Watery Art, Moving Silence and 3D MattersAs the Shanghai summer begins to sizzle city residents are advised to drink plenty of water, if not through the mouth then at least get some into your eyes. Ofoto Gallery and An Art Gallery at 50 Moganshan Road will display beautiful water-themed art works in Water, a group show by 13 Chinese artists from Jul 18th to Sep 14th. Additionally, watery underwater photographs of submerged models in elaborate settings shot by internationally celebrated Hawaiian artist Christy Lee Rogers are on display at Art Labour Gallery until August 18th.

GIGA, the company that helps architects and builders choose and understand the materials they use, is organizing an event titled Materials Matter at the Perkins+Will Studio on July 9th, 7-9pm. GIGA CEO Raefer Wallis will be explaining the importance of material selection as it relates to interior air quality and other aspects of building design.

3D printing is one of the technologies expected to revolutionize many aspects of our economy and civilization, and science fiction writer David Hartmann explores how in his new novel Complexity is Free. He will be speaking on the topic at Hero Center in the SOHO Building, 28 East Yuyuan Road, July 14th from 6:30 to 9:30pm. RSVP on the MeetUp.com website (www.meetup.com/ShanghaiForum/events/223396555/)

The Kulunka Teatro from Spain performs its acclaimed silent puppet show André & Dorine at Shanghai Grand Theatre from July 29th through August 2nd. The Los Angeles Times calls it a "...seamless, brilliantly performed piece (that) achieves a witty eloquence and touching humanity that belies its lack of verbal text through pure creative theatricality." Tickets can be booked by calling 6217 2426.

Echoes of Eternity is a contemporary ballet based on Song of Everlasting Sorrow, a poem by Tang dynasty poet Bai Juyi (772-846). The Shanghai Ballet Company performs the work on July 30th and 31st at Shanghai Grand Theatre. Call 6217 2426 for tickets.

An interesting 3D art exhibition titled Beyond Dunhuang (our translation) is taking place now through October on the 3rd floor of 1933 Old Millfun, Liyang Road #611. Open daily 9am to 8pm, tickets are RMB 60.

This new restaurant / cafe launched by the creators of the Naked Retreat resort on Moganshan mountain is a place to go if you're in search of a healthy meal or just want to have a drink in a close-to-nature environment. Leafy trees seen through large windows, a lush indoor wall garden and thick wood tables create a mountain-resort ambience.

Although one review described the food here as lacking flavor, we found the grilled salmon filet with shrimps, clams and watercress to be quite delicious and fresh, and our tartar of pickled baby beets, salty goat cheese and mixed herbs was likewise mouthwateringly good. A vegetarian mini-burger plate with fries was less flavorful but satisfying enough, and our tonka bean cheese cake and sorbet with fruits were simply sublime.

Restaurant Suggestion — Naked Bite

Naked Bite

297 Wuyuan Lu near Wukang Lu

Telephone: 3356 6007

Sofia Group News – Our New OfficeEarly last month we moved office from our former location on Changde Lu into a bright new space in the Equatorial Hotel building diagonally across from Jing An Park on Yan An Xi Road. Here are some photos of the new space, and we want to tell you a little about its design.

One of our two guiding principles in whatever we do at Sofia Group is that we want to make work life as enjoyable as possible, both for our clients and for ourselves. When designing our new office, we tried to put this belief into practice by implementing small steps that can have a big effect on comfort and productivity. These included careful set up of illumination, and introducing height adjustable tables so that staff can choose to either stand or sit while performing work.

Many traditional offices are separated into an open office area and enclosed manager rooms. Yet research has shown that while people do like to sit together in teams, they do not like to work in spaces that are completely open to the greater interior space. Hence we tried to achieve a design where all workstations are positioned in an inner area, with colored glass screens used to guide people to walk along the main corridor instead of walking directly by people's desks. In addition, when sitting together in teams noise disturbance from long phone calls can be a concern, and so we installed sound insulated telephone boxes that can be used by anyone for confidential or longer phone calls. While small in size, the phone rooms have cushioned stools and are still fully equipped with internet, telephone and air-conditioning.

Market Notes

With rents in Lujiazui still trending upwards, about 45% of office space in Shanghai tower has been let out. Spaces in the high- and mid-level regions of the building are running from RMB 17 to RMB 20 / sqm / day.

Occupancy at Corporate Avenue beside Xintiandi is currently about 80%.

The new Da Zhong Li building in Jing An is expected to be handed over soon. Occupancies in the area are also high.

The Place in Hongqiao has already achieved 90% occupancy and remaining available spaces are renting at higher rates.

Office Building Rental Rates by CBD Area: CNY / sqm / day

Shanghai Office Occupancy in Percentage

Our consultants will be delighted to personally assist you at any time. You may call our main Shanghai office number, (86 21) 6230 1919, or contact directly a consultant who handles your specific concern:

Sofia GroupYour Shanghai office, industrial and retail property specialists

Amanda Zhu Office rental, Factory rental, Property valuation

languages: English, Mandarin+86 21 6230 1919 x 806amanda@sofiagroup.com

June Zhang Factory rental, Property valuation, Design & fit-out

languages: English, Mandarin+86 21 6230 1919 x 802june@sofiagroup.com

Jet GuoOffice rental, Property valuation

languages: English, Mandarin+86 21 6230 1919 x 805jet@sofiagroup.com

Gu MengOffice rental, Landlord contact, Factory rental

languages: English, Mandarin+86 21 6230 1919gumeng@sofiagroup.com

Bjarne BauerOffice rental, Factory rental, Property valuation, Design & fit-out

languages: German, English, Mandarin+86 21 6230 1919 x 808bjarne@sofiagroup.com

Jenny JiangOffice rental, Retail rental, Property valuation

languages: Spanish, English, Mandarin+86 21 6230 1919 x 803jenny@sofiagroup.com

Jean GaoOffice rental, Landlord contact, Factory rental

languages: English, Mandarin+86 21 6230 1919 x 800jean@sofiagroup.com