Lujiazui Financial Holding Square occupies one of Pudong's largest intersections
As analysts warn of a “lost decade” for China's office market, state-backed development company Shanghai Lujiazui Development Group Co., Ltd. (better known as Lujiazui Group) has announced plans for a RMB 30 billion The company is rushing to sell about 20 office towers in Shanghai, estimated to be worth about 410 million yen. billion) or more.
The company, which is controlled by the Pudong district government, is seeking buyers for the building in its portfolio of office assets centered on the Lujiazui financial district and Qiantan international business district on the eastern side of the Huangpu River, market sources confirmed to Mingtiandi. He said he asked a broker to help him find one. China's real estate crisis is eroding the finances of even the companies with the most government support.
The portfolio includes Lujiazui Financial Holding Plaza, Lujiazui Fuhui Building, Century Metropolis, Century Financial Plaza, DBS Bank Tower, China Diamond Exchange Center, etc., and the Shanghai-listed group It is the master developer of Lujiazui Financial District and Lujiazui Fuhui Building. and Qiantan. Details of the exercise were first reported by Bloomberg on Tuesday.
News of a possible fire sale comes after the company warned in its annual report released on Monday that Shanghai's office market was facing a “long-term correction.” This echoes Oxford Economics' analysis last week, which highlighted oversupply and weak demand in China's major office markets. .
Look to Pudong
One local broker, who described the portfolio as largely comprised of “trophy assets”, said the marketing efforts had received an immediate response from potential buyers. The Pudong division of SASAC, the State-Owned Assets Supervision and Administration Commission of China's State Council, which is responsible for managing state-owned enterprises, is the major shareholder of Lujiazui Group.
Mr. Xu Erzhen, Chairman of Lujiazui Group, prepared several buildings.
Built in 2009, DBS Bank Tower in Lujiazui offers office space with a total floor area of 72,044 square meters (775,475 square feet). The 19-story building is located just south of the east bank of the Huangpu River, about 1 kilometer (0.6 miles) from Lujiazui Station on Shanghai's Metro Line 2.
Completed in stages in the early 2010s, Lujiazui Century Financial Plaza consists of five office buildings spanning a total floor area of 312,000 square meters of office space. Located at 1788 Century Avenue, this property is close to the Zhuyuan business district and has access to subway lines 4, 6, and 2.
In Qiantan, south of Lujiazui, Lujiazui Group has set up three joint venture projects with Swire Properties, as part of which the Hong Kong-based developer announced in October last year that Lujiazui Group had acquired a mixed-use project in Pudong. Confirmed the purchase of 40% stake in two companies. Part of a HK$100 billion ($12.8 billion) regional investment plan.
Lujiazui Group's urge to sell comes as other state-backed mainland developers such as Zhongyang Group and China Vanke sell assets to meet financial obligations in the face of collapsing demand for both residential and commercial land. This is occurring in response to the current situation.
Sino Ocean announced on Monday that its largest shareholder, state-owned China Life Insurance, is in talks to take over a stake in a Beijing shopping mall project for 3.1 billion yuan ($428 million). In its 2023 financial results released on Tuesday, the developer said it suffered a loss of RMB 13.4 billion in 2023, after suffering a shortfall of RMB 13.8 billion the previous year. In May last year, Zhongyang sold a shopping center in Beijing to mainland retailer EasyHome for RMB 348.8 million, but later defaulted on its offshore bonds in late 2023.
Earlier this month, reports emerged that China Vanke, a subsidiary of state-run Shenzhen Metro Group, was in talks to sell a 21% stake in fund management giant GLP, which is struggling to repay $14 billion in debt.
Oversupply weighs most heavily
In a report titled “China's office market appears poised for a lost decade,” Oxford Economics said that while demand-side fundamentals are relatively weak, the main concern is He pointed to developers continuing to build new office buildings in a market where occupancy rates are at record levels.
“Despite global headwinds, China's office market has been flooded with new supply, as evidenced by high vacancy rates compared to other global markets,” the analysis said. “Currently, the vacancy rate in major cities across China is over 20%, and in almost half of the major cities it is over 30%.”
As a result, China has the highest office vacancy rate of any major market in the world, according to Oxford Economics.
The recession comes at a time when urbanization rates in some of China's major cities are slowing rapidly, with many opting for smaller cities and towns in rural areas, the report said. Oxford Economics, citing a study by Metro Data Tech, said Shanghai will experience a net outflow of population in 2023.
