SHKP Tops Out Supertall Shanghai ITC Tower as Mainland Office Market Struggles

Hong Kong developer Sun Hung Kai Properties held the topping-out ceremony for the main office tower at its International Trade City (ITC) project in Shanghai’s Xujiahui area on 29 December, adding 70 storeys of office space to the company’s portfolio in the city.

Rising 370 metres, the 240,000-square-metre (2.6 million square foot) structure, which is entering the market as corporate occupiers continue to scale back their office footprints in China, is not only the tallest skyscraper the developer has erected on the mainland, but also Shanghai’s tallest office building outside of the Lujiazui financial district.

The ITC Tower 2, is the final major piece in the 700,000 square metre project above the Xujiahui metro station in the southwest corner of central Shanghai, with Sun Hung Kai attempting to repeat the success of its IFC project in Pudong and its ICC development on Huaihai Road in a traditionally grade B location.

Designed by Hong Kong-based Lead8 and Zaha Hadid Architects, the largest tower in the ITC complex is the largest office structure in Xujiahui, which currently has an average office vacancy rate of over 16 percent, as even core submarkets in the city are experiencing double-digit vacancy levels.

Mega-Project Nears Completion

ITC, a 706,000 square metre mega-project, is wholly owned by SHKP as its largest single integrated development in mainland China, and is expected to achieve LEED Platinum certification under the US Green Building Council’s rating system for sustainable projects, as well as Platinum status on the Well scale for healthy workplaces.

Encompassing office towers, a 240,000 square metre shopping centre and an Andaz hotel, the ITC offers direct access to five metro lines via Xujiahui station, with a series of footbridges connecting the complex to major commercial buildings and heritage sites nearby. Completion is slated for late 2024, as confirmed by SHKP.

Sun Hung Kai has been developing the ITC since it purchased the 66,000 square metre plot near Hang Lung Properties’ Grand Gateway 66 complex in September 2013 for a record RMB 21.8 billion ($3.6 billion).

SHKP completed the project’s 220-metre-tall T1 tower in the first half of last year with leasing of that building’s 110,000 square metres of office space still underway. Shanghai media reported in August that a number of tenants including Uniqlo’s parent company Fast Retailing and building design and engineering firm ARUP had started to move into the tower.

High Hopes for Xujiahui

“ITC in Shanghai will distinguish itself from other projects through its environmentally friendly construction and design, and is expected to bring a new face to the Xuhui District,” Sun Hung Kai Properties chairman Raymond Kwok said in the company’s most recent annual report, however, the complex is entering a challenging market.

The first two phases of the project, which included 45,522 square feet of office space and 3,530 square feet of retail, were completed in 2018 with the new tower expected to compete with existing properties in the area, such as Grand Gateway 66, for grade A occupiers.

In the final quarter of 2022, average office rents across Shanghai fell slightly to RMB 247.5 per square metre per year, while the average rent level in core submarkets stabilized at RMB 285.3 despite an overall contraction in leasing in prime area as the amount of space given up in those districts exceeded the quantity committed to in new deals, according to a Cushman & Wakefield report. The overall downtown grade A office vacancy rate stood at 11.2 percent and rising.

The consultancy’s latest data showed that grade A office buildings in Xuhui district, which includes Xujiahui, averaged 16.6 percent vacancy in the fourth quarter, higher than Lujiazui’s 10.8 percent and Jing’an’s 10.9 percent. Grade A rents in Xuhui averaged RMB 302.5 per square metre per year during the fourth quarter, compared with RMB 312.8 in Lujiazui and RMB 337.2 in Jing’an.

Core CBD markets like Lujiazui have no new office supply coming online in 2023, but new developments in other locations, especially in non-prime locations near the city centre, like Xujiahui, will bring a total of 1.57 million square metres of new office space online in the next two to three years.

The report pointed to ITC Tower 2 as one of the biggest sources of new office supply in the city in 2023, as the Sun Hung Kai is expected to begin pre-leasing this year.