Real estate is a dynamic sector and experts always keep a watch on the prices prevailing in different markets. In the Far East, Hong Kong and Singapore have traditionally led the region in setting new bench marks for property prices. They are both islands with a fixed supply of land available for development and an inherent constraint on expansion. But shanghai has emerged as the new hot spot, as far as the real estate sector is concerned, in the region. The 101 storey Shanghai World Financial Center is creating new benchmarks for the city. In an unusual move for the sector the tower’s developer, Japan’s Mori Building Co., says it has done three so-called strata deals this year: floor 68 for 273 million yuan, or 82,300 yuan per square meter; floor 72 for 267 million yuan, also 82,300 yuan per square meter; plus floors 69, 70 and 71 for a total 769 million yuan, representing a discounted price of 82,000 yuan per square meter. Experts from the sector are of the opinion that it is not a normal market situation as they are not aware of strata title deals anywhere involving office floors at such heights.
Michiho Kishi, a spokesman for Mori Building China, explained that they have turned down expression of interest by investment buyers and are looking for end users as buyers for a limited portion of the building. They were entering into sales agreements in order to free up capital for Mori to invest further in China. Thomson Group Ltd., the Taiwan property group confirmed the purchase of 72nd floor in the tower. Lina Wong, a managing director of Colliers International in Shanghai, who acted on behalf of Tomson, says that abnormal market situations call for unusual solutions. She also confirmed that Mori has applied conditions on sale of individual floors that they may not be resold or leased without the developer’s permission for a minimum of seven years. The Shanghai World Financial Center is considered the world’s third tallest building. The unusual transactions have boosted the cost of a floor of the tower to almost $41 million which was the price of the Empire State Building in New York when it was built in 1931.
The property prices in Shanghai have risen dramatically in the recent past but still have a lot of catching up to do with Singapore and Hong Kong prices where an office property could cost three to four times more. Tomson themselves are infamous for pricing their luxury riverside apartments called Riviera beyond the top of the market. The local government is concerned about the escalating real estate prices as it is taking the mid-range apartments out of the reach of the masses. They would ideally like to maintain a parity between the economic growth and the increase in the prices. Developing the Shanghai World Financial Center cost the developers Mori about $1.13 billion, roughly $11.2 million per floor. Shanghai’s Puxi district recently witnessed a sale of a 40 floor office building for $670 million to become the biggest property transaction in China in 2011. About four years ago a 39 floor office building was sold in New York for $1.8 billion making it the most expensive building transaction till date.