Had two hours to spare and went over to the newly opened Shanghai World Financial Center building. For a while, it will be China's highest building, until Shanghai Tower opens for business right across the road in 2014.
It feels a bit surreal. First of all, there are dozens of security guards at all entrances, you have to walk through metal detectors, and there are German shepherd dogs sniffing you. Or rather, for some strange reason the dogs were only sniffing visitors with Asian-looking faces, whereas I was waved through with a "thank you, sir!".
Inside, there's a small food/shopping section downstairs, which is all nice and shiny, but doesn't seem to have any customers. But then, it was 2 pm, so the lunchtime crowd had left already. On the ground floor, there's the reception that gives you access to the office floors of the tower. There were about a dozen smiling receptionists waiting for visitors. Unfortunately, the only visitors coming in and out were groups of old ladies from the provinces being led around by young flag-waving tour guides. And a group of Japanese men in office suits, which looked like, well, Japanese salarimen on a tour to see Japan's most high-profile investment in China. There was no list of tenants to be seen anywhere. But there were computer screens showing stock market news, and sometimes naming a few "sample tenants" of the building. So all in all, it sounds like the market rumour of 10-30 % office occupancy might well be true.
No problem, you might say, these buildings take a while to fill up. Except that right next door, there was a smaller, but still massive skyscraper in the final stages of construction. Two blocks down the road, the Shanghai IFC shopping mall and office tower complex looks like it will be completed later this year or early 2010. And just by looking around in all directions, I could spot another 4 high-rise buildings in various stages of construction.
As for office demand, I only have anecdotal evidence, but it doesn't sound too great: A domestic insurance company hurriedly moved out of its Lujiazui offices, leaving several floors to let. A foreign JV insurance company just consolidated its two locations into one. Another foreign JV insurer sent all expats home to cut costs. Dresdner Bank Shanghai branch has a floor in Jin Mao, whereas Commerzbank has a floor at WFC. Surely the merged bank will not need two separate Shanghai branches. All of it is small fry, but it's just the few things I've heard about during three days in Shanghai.
So it's no surprise that - as Shanghai Daily reported yesterday - "prime quality" office rents have fallen 20 % in late 2009, and are set to fall a further 20-30 % this year, with vacancies continuing to climb sharply.
But I guess the big Chinese banks might take up some of the vacant space: According to China Daily, the big four banks want to hire 30,000 college graduates this year (in all of China of course, not just in Shanghai), to deal with rapidly expanding business volumes. Smart move: They'll need lots of manpower to deal with all those upoming real estate problem loans...