The result is that companies looking for space usually find that the buildings that are available fail to meet exactly their required technical specifications and are faced with having to compromise or take the more expensive route of building to specification.

Shanghai has a number of industrial areas where foreign companies have tended to set up operations, these are in almost exclusively in government backed industrial parks. Many of Shanghai's industrial parks are located in areas designated as economic and technological development zones or special economic zones. The zones are graded by type and level such as national or municipal, the level of government approval is important as it determines the extent of tax holidays and other financial incentives available to investors. Manufacturing zones are usually divided into general industrial or technology zones. Export and free trade zones are designated for pure export industries as occupiers can operate outside China's custom tariff areas.

Historically, there were no clearly defined industrial areas in Shanghai and the geographic distribution of industry in Shanghai remains highly fragmented. This broad distribution of land uses results from the socialist model of city development and applies to all parts of Shanghai's municipal areas.

The last decade, especially the last 5 years, has seen a clear trend towards a more rational pattern of industrial location, funnily enough this was often to make way for the office and residential projects that Shanghai was so desperately short of just 5 years ago. One important measure taken was to increase the amount of land zoned for industrial use. The earliest areas made available were Wusong / Baoshan and Minhang. This was later followed by other outer suburbs and the southern coastal areas and Pudong New Area.

Shanghai now has a number of industrial zones in the suburbs, particularly in the satellite towns of Minhang, Caohejing and Songjiang. Pudong also has a number of zones catering to hi tech and light industry, the best known of which are Jinqiao Export Processing Zone, Waigaoqiao Free Trade Zone and Zhangjiang Hi-tech Park.

In terms of the geographical distribution of industrial land, there are roughly identify four major 'industrial' zones:

1. Central City Core Area and Inner Ring Road
2. Between Inner and Outer Ring Roads
3. Satellite Industrial Centres
4. Industrial Development Zones in Pudong

Industrial property costs vary from location to location and according to the type of property. Much of the 'market' is fixed by the government bodies which manage the various industrial zones that serve foreign companies, but there is competition between these zones. A few examples are as follows:

Location Asking Rents Jinqiao Export Processing Zone Waigaoqiao Free Trade Zone Zhangjiang Hi-Tech Park Xinzhuang Industrial Zone

(US$ per sq.m. per month) US$3.8 to 4.5 US$3.9 to 4.5 US$3.5 US$2.2 to 2.9

Asking Prices (US$ per sq.m.) US$240 to US$400 US$400 US$300 US$96 to US$108 (steel frame)

US$132 (brick)
Source: FPDSavills Research

The industrial market in Shanghai is maturing, but like everything else it will take time before the historic shape of the 'market' takes on a new form. The government designated zones continue to dominate the market and this is unlikely to change in the short term. In any event many foreign companies locate in the property provided by their joint-venture partner. For many this is not a long term solution and the increasing need is to look elsewhere for a more satisfactory location.

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FPDSavills are able to help with valuations, due diligence and agency work in the industrial sector including land acquisitions. For further information please contact Sam Crispin on 6474 8908 or by e-mail scrispin@fpdsavills-sh.com