Office rents rose faster in Shanghai than anywhere else in Asia last year, according to a survey.

The rise in Shanghai was the third fastest in the world, the survey by real estate consultant Cushman & Wakefield found.

Rising 9.7 percent last year, Shanghai's annual occupancy cost was reported at 2,878 yuan (US$347.70) a square meter, ranking 29th in the world, Cushman & Wakefield said Sunday.

Monterrey, Mexico, topped the growth rate at 10.5 percent, followed by Brussels, Belgium, with 10 percent.

The annual survey monitored the world's 202 top office locations in 45 countries. In about 40 percent of the locations, rents either rose or were stable last year.

Shanghai became the most expensive city on China's mainland in 2003 although it still ranks far behind Hong Kong, which ranked 17th in the world.

Chris Cuff, Cushman & Wakefield China's executive director of agency services, said the huge increase in new office space was surpassed by even greater growth in demand from both local and multinational companies.

"New demand is expected to continue to outpace new supply for at least the next two years, leading to lower vacancy rates and higher rents," Cuff said.

Guy Hollis, head of Jones Lang LaSalle China, also forecast a bright future for the local office market.

"Shanghai's office market is at nine o'clock on a market cycle," Hollis said. "The demand and rents will grow stably in the coming several years."

The blistering economic growth on the Chinese mainland and the relaxation of business restrictions under the WTO arrangement will continue to attract large multinational corporations to China, particularly Shanghai.

Jones Lang LaSalle said overseas insurance companies eyeing a stake in China's emerging insurance sector will become major consumers of new commercial buildings in Shanghai.

An official of Allianz Dazhong Life Insurance Co, which has set up six back offices in Shanghai, said: "With business growing, we have to rent larger places as our back offices."

Haier New York Life Insurance Co, which has already set up three back offices in the downtown area, said it plans to rent more offices soon to house its training and customer services staff.

Last year, the local office market significantly outperformed other key Asian cities in terms of rental growth. Singapore was the biggest loser, falling from 19th to 31st on the world rankings.

Tokyo is the most expensive office location in Asia and London retains its position as the world's most expensive city for office space in this year's survey.

The total cost of occupying one square meter of prime office space is US$1,659 a year in London's Mayfair district.

This is 80 percent more than the US$920 in Tokyo, the most expensive office location in Asia and the 3rd on the world rankings.

(eastday.com April 5, 2004)