Shanghai's real estate market remained robust in the first quarter, with the office and industrial sector particularly strong, according to the latest report from leading real estate consultancy Jones Lang LaSalle.

Average office rents across the city reached 7.82 yuan per square meter per day, up 0.7 percent from the last quarter, while vacancies remained low at only 4.9 percent.

A-grade premium office rentals were especially strong, with brisk pre-leasing activity from multinationals and financial institutions, the report said.

The A-grade office market will maintain its strong momentum up to 2010, when the city hosts the World Expo, and office rents are expected to continue rising until then, said Anthony Couse, managing director of Jones Lang LaSalle (Shanghai).

The industrial property sector, which includes logistics, business parks and manufacturing facilities, also remained robust in the first quarter, pushed up by retailers, third-party logistics firms and automotive companies, the report said.

Rents for logistics facilities increased briskly, up 11 percent since the last quarter, largely driven by rapid increases in bonded logistics rents, as the world's leading logistics firms and freight forwarders continued to build warehousing and distribution centers in the city.

German logistics giant DHL, for example, is building 100,000 square meters of warehouse space in Shanghai.

Meanwhile, overall retail space vacancies declined for the second consecutive quarter to 7.5 percent, down from 9 percent in the previous quarter. Rents climbed to 39 yuan per square meter per day in prime, ground floor locations, a trend that is expected to continue this year as prime locations remain saturated, according to the report.

In the residential sector, sales of luxury apartments continued to slow, while rents continued to climb.

And the high-end rental housing market may come under pressure later this year as new serviced apartments open. The property market in the city and the country as a whole is booming as investors continue to target the sector.

"The capital flow into the Chinese real estate market is still growing and more investors will continue to look for quality assets to acquire. We expect to see a more developed real estate investment market this year," said Kenny Ho, head of research at Jones Lang LaSalle (Shanghai).

China's direct real estate investment reached $9.91 billion in 2006, up 70 percent over 2005.

(China Daily April 12, 2007)