December 18,2008

2008 Survey Results of Office Requirements in Shanghai

－During the last one year, the business performance of multinational firms in Shanghai has firmed up. Mid-term expansion is forecast for the next three years.

－Business in all categories are expected to continue to require additional employees and office space.

－As an office relocation option, the Lujiazui area is popular mainly among financial services, insurance firms, and non-manufacturing businesses.

Mori Building Co., Ltd. (Headquarters: Roppongi, Minato-ku, Tokyo , President and CEO:

Minoru Mori) has conducted successive “Survey Results of Office Requirements in Shang-

hai” annually since 2004.This study is conducted in order to survey major foreign firms in

Shanghai on the current state and prospects of business activities in Shanghai and office

demand in future, and aims to grasp trends of those firms and demand trends in the office

market.We have compiled this fifth survey which was conducted in October 2008 and hereby

report the results.

<Framework of 2008 Office Requirements Survey in Shanghai>

□Research Period□Research Sample

□Response

（Reference）　Framework of 2007 Office Requirements Survey in Shanghai3,679 multinational firms in Shanghai662(18.0%) companies responded.

：　October 4th ~ October 31st, 2008：　3,728 multinational firms in Shanghai　　Canada/USA　　Austria/France/Germany/Italy/Switzerland/UK/Other EU Nations　　Australia/Korea/Japan/Singapore：　448 companies（12.0%）

Contacts　Public Relations, Mori Building Co.,Ltd. ( attn : Morisawa, Ikki)　Address: Roppongi Hills Mori Tower P.O. Box 1, 6-10-1 Roppongi,　Minato-ku, Tokyo 106-6155, Japan　Tel：+81-3-6406-6606, Fax：+81-3-6406-9306　E-mail：koho@mori.co.jp

firms) in the financial services & insurance industry (Chart 2). Companies responding that business performance in the most

recent quarter was “worse that expected” were queried on their reasons for that. Dominant among the reasons given was “a sharp rise in the cost of raw materials” (45%), which was followed by “a sharp rise in the cost of labor” (36%) and “the revaluation of the yuan” (24%). Meanwhile, no more than 20% cited the impact of the “the subprime mortgage problem” (Chart 3).

In regard to business prospects over the next three years, no sizeable changes are forecast in comparison with recent years (Chart 4). Although the financial services & insurance industry and manufacturing firms saw a decrease in the response “expand,” 60-70% of these firms in each category still selected the response “expand” (Chart 5).

So, while on the one hand companies in Shanghai feel the effects of the economic situation on their own business perfor-mance, it is clear that the majority of them tend to anticipate a trend toward expansion of their business in the future.

Current state and forecast of business in Shanghai１

・ The majority of firms responded that business performance over the prior year has been “better than expected” or “as planned.”

・ Though there has been a downturn in most recent business performance, a mid-term expansion trend is forecasted.

In terms of business performance of foreign firms in Shanghai during the past year, 35% of responding firms answered “Beyond expectations” (Chart1). Though this represents a decrease from the 41% in 2007, companies responding “worse than expected” remained at the same 9% level as last year, an indication that the business performance of companies in Shanghai has taken an upturn.

Next, a look at the most recent quarter shows that “better than expected” was given by 22%, ”as planned” by 61%, and ”worse than expected” by 17%, While the ratio of firms answering “better than expected” decreased, and “worse than expected” increased from the past year, the major of firms responded “as planned” (Chart 1).

A breakdown by business category of business performance over the most recent quarter indicates an increase in “as planned” among all categories. Despite an increase in the response “worse that expected” among manufacturing and non-manufacturing firms, the same was given by a mere 5% (three

図5　今後3年間の事業展開予定

0%

20%

40%

60%

80%

100%

2006年（N=475）

2005年（N=344）

2004年（N=301）

85% 75% 81%

14%24% 19%

拡大 現状維持 縮小0%

- 1 -

1%

76%

23%

2007年（N=662）

Chart 3　Causes for downturns in business performance during the last quarter

(multiple choice)

0 10 20 30 40 50% %%%%%

Subprime mortgage problem

Others

Delays in deregulation

A sharp rise in the cost of labor

A sharp rise in the cost of raw materials

Revaluation of RMB

20%

34%

7%

36%

45%

24%

73%

26%

1%1% 1%

2008年（N=448）

Chart 1　Business performance during the past

0%

20%

40%

60%

80%

100%

2006（N=469）

2005（N=343）

2004（N=298）

24%

Better than expected

27% 35%

56%56%60%

16% 17% 9%

As planned Worse than expected

8%

51%

41%

2007（N=662）

9%

56%

35%

2008（N=446）

Chart 4Business expansion plans over the next three years

0%

20%

40%

60%

80%

100%

2006（N=475）

2005（N=344）

2004（N=301）

85% 75% 81%

14%24% 19%

Expand Unchanged Downgrade0% 1%

76%

23%

2007（N=662）

73%

26%

1%1% 1%

2008（N=448）

0%

20%

40%

60%

80%

100%

Manufacturing firms

（N=117）

Non-manufacturing

firms（N=268）

Financial institutions（N=59）

Chart 2　Breakdown by business category of business performance over the last quarter

57%

15%

21%

60%

19%

19%

76%

5%

28%

Chart 5 Breakdown by business category of companies responding that their business will expand

2004 2005 2006

86%78%

77%84%

63%55%

86%

Financial institutions（2008：N=60）

Non-manufacturing firms（2008：N=270）

Manufacturing firms(2008：N=117)

0%

20%

40%

60%

80%

100%

75%

69%

81%

2007

85%

75%75%

63%

2008

83%

61%

17%

22%

Last Quarter（N=445）

※Only for those companies awnwered “Worse than expected”

In terms of business performance of foreign firms in Shanghai during the past year, 41% of respond-ing firms answered “Beyond expectations” (Chart 1).　Increased “Beyond expectations” responses from 2004 to 2006 and an increase of 6% from the past year prove that the business performance of foreign firms in Shanghai has been strong.

For business performance prospects over the next three years, 76% of firms responded “Better than now (business expansion)” although the number of responses was slightly lower compared to last year. This would indicate that overall business performance of foreign firms in Shanghai will continue the trend of expansion in the future.

Better than expected As planned Worse than expected

2008 Office Needs Report of Shanghai

Future prospects of Shanghai offices over the next three years

Chart 7　Staff increase/decrease plans for the Shanghai offices in the next three years

２

・ Shanghai will be enjoying even greater importance as a management base city within Asia and Oceania.

・ Companies are expected to require additional office space and employees in Shanghai in mid-term, over the next three years.

Companies currently in Shanghai gave as the city in which they base operations in Asia/Oceania (multiple choice) “Shang-hai” (50%), “Tokyo” (27%), “Hong Kong” (17%), and “Singapore” (11%). Shanghai was thus cited most as the management base. On top of that, 69% of companies answered that they expected to have their management base in “Shanghai” three years into the future, an indication that the position of Shanghai offices will take on even greater importance in the future (Chart 6).

Next, on the subject of plans to increase/decrease employ-ees and office space used in Shanghai, 61% of firms responded that they planned on increasing staff, while 51% answered that they intended on increasing the space used. Even a breakdown by business category shows that over half in all categories plan on staff increases and office space expansion over the next three years (Charts 7, 8).

Chart 6Cities in which firms in Shanghai have their Asia/Oceania management base (multiple choice)

Singapore TokyoShanghai

Despite the financial crisis sparked by subprime loans spreads all over the world and the so-called “Lehman Shock” prior to this survey in September, the results of this survey suggest that most financial/insurance firms which operate in Shanghai have not observed any substantial deterioration in their most recent business performance and assumed that their business would likely expand and that they would thus require more human resources and larger office space. However, there are certain regulations imposed upon foreign companies in the Chinese financial market at this point and the results of this study also imply that their response is based on their hope that these regulations could be eased in some ways in the future. We thus need to keep our eyes on future trends here.

- 2 -

Chart 8　Plans for increased office space in Shanghai offices in the next three years

0

20

40

60

80

100

65％

13％

21％

60％

8％

32％

67％

12％

21％

64％

20％

14％

1％

2007(N=662)

2008(N=448)

2008(N=60)

2007(N=97)

2008(N=270)

2007(N=392)

2008(N=117)

2007(N=173)

0

20

40

60

80

100

2008(N=447)

2008(N=60)

2008(N=269)

2008(N=117)

50％

18％

31％

53％

12％

35％

53％

17％

30％

43％

23％

33％

1％1％

Hongkong Seoul Bangkok Sydney Taipei Others

1％9％

29％

61％

13％

30％

57％

10％

27％

62％

31％

7％1％

61％

1％2％

12％ 15％ 11％ 14％

36％ 34％

2％

51％

37％

50％

33％

51％ 50％

1％ 1％2％

0

10

20

30

40

50

60

70

80

その他

自社ビル取得

現入居ビルの建替え

セキュリティレベル

の向上

オフィスの支店・分室

新会社、

新規事業部等の設立

ステータスの向上

設備・機能の良い

ビルへの移転

立地の良いビルへの移転

ビルコスト削減

分散したオフィスの統合

オフィス面積削減

オフィス面積増加

2234

44

19 2232

40

16 16

0%

20%

40%

60%

80%

100%

0%

20%

40%

60%

80%

100%

23243

2127

2117

1111

69

50

423

1315

2008　(N=446) Forecast for three years from now (2010) (N=444)

0%

20%

40%

60%

80%

※ If all choose the same option, that option will be 100%

2007(N=662)

2007(N=97)

2007(N=392)

2007(N=173)

2008 Office Needs Report of Shanghai

firms) in the financial services & insurance industry (Chart 2). Companies responding that business performance in the most

recent quarter was “worse that expected” were queried on their reasons for that. Dominant among the reasons given was “a sharp rise in the cost of raw materials” (45%), which was followed by “a sharp rise in the cost of labor” (36%) and “the revaluation of the yuan” (24%). Meanwhile, no more than 20% cited the impact of the “the subprime mortgage problem” (Chart 3).

In regard to business prospects over the next three years, no sizeable changes are forecast in comparison with recent years (Chart 4). Although the financial services & insurance industry and manufacturing firms saw a decrease in the response “expand,” 60-70% of these firms in each category still selected the response “expand” (Chart 5).

So, while on the one hand companies in Shanghai feel the effects of the economic situation on their own business perfor-mance, it is clear that the majority of them tend to anticipate a trend toward expansion of their business in the future.

In terms of business performance of foreign firms in Shanghai during the past year, 35% of responding firms answered “Beyond expectations” (Chart1). Though this represents a decrease from the 41% in 2007, companies responding “worse than expected” remained at the same 9% level as last year, an indication that the business performance of companies in Shanghai has taken an upturn.

Next, a look at the most recent quarter shows that “better than expected” was given by 22%, ”as planned” by 61%, and ”worse than expected” by 17%, While the ratio of firms answering “better than expected” decreased, and “worse than expected” increased from the past year, the major of firms responded “as planned” (Chart 1).

A breakdown by business category of business performance over the most recent quarter indicates an increase in “as planned” among all categories. Despite an increase in the response “worse that expected” among manufacturing and non-manufacturing firms, the same was given by a mere 5% (three

Non-manufacturing

Financialinstitutions ManufacturingAll Non-

manufacturingFinancialinstitutions ManufacturingAll

Increase Maintain current level

Decrease Undecided Increase Maintain current level

Decrease Undecided

＜Reasons for office relocation＞Similar to last year’s findings, the top three reasons for office

relocations given were “to increase office space” (71% – the top reason), “for better building facilities” (44%), and “for better location/accessibility” (34%) (Chart 10). This indicates that there is strong demand for large, high-quality office buildings, regard-less of the business category (Chart 11).

Of the firms responding, 16% answered that they were considering office relocations to central Shanghai within the next three years. Including firms that considered the need for this, about half of the companies felt the need for office reloca-tion, a finding that more or less equals that of last year’s survey (Chart 9).

面積増加 面積減少分散した

の統合 ト削減立地の良

の移転

設備・機

移転スの向上

新会社、 オフィス

分室

セキュリ

ルの向上

現入居

建替え 取得

75% 2% 33% 38% 15% 5% 11% 0% 7% 0%

71% 0% 15% 34% 45% 20% 10% 0% 4% 0%

61% 0% 16% 39% 52% 16% 10% 16% 13% 0% 0% 3%

Future office relocation in central Shanghai: plans and reasons３

・ About half of the firms felt the need for office relocation.・ They sought office buildings on the basis of large size, favorable location, and sophisticated specs.

Chart 9　Office relocation plans over the next three years

Chart 11　 Breakdown by category of reasons for relocating offices (multiple choice)

- 3 -

0

102030

4050

60 70

80

0

10

20

30

40

50

60

70

80

その他

自社ビル取得

現入居ビルの建替え

セキュリティレベル

の向上

オフィスの支店・分室

新会社、

新規事業部等の設立

ステータスの向上

設備・機能の良い

ビルへの移転

立地の良いビルへの移転

ビルコスト削減

分散したオフィスの統合

オフィス面積削減

オフィス面積増加

71

0

16 2234

44

19 2211 11

0 4 0

Chart 10　Reasons for office relocation (multiple choice)

2008 survey result (N=207)

2007 survey result (N=333)

設立

0 20 40 60 80 100

Have the plan

No plan/intention

In need but not considering

Considering

50%

31% 53%

7% 32%11%

7% 9%

2007 (N=662)

2008 (N=448)

67

214 17

3240

16 169 10

1 2 4

26%

21%

33%

12%19%25%20%

％ ％％％％％

0%

20%

40%

60%

80%

16%47%

19%

firms) in the financial services & insurance industry (Chart 2). Companies responding that business performance in the most

recent quarter was “worse that expected” were queried on their reasons for that. Dominant among the reasons given was “a sharp rise in the cost of raw materials” (45%), which was followed by “a sharp rise in the cost of labor” (36%) and “the revaluation of the yuan” (24%). Meanwhile, no more than 20% cited the impact of the “the subprime mortgage problem” (Chart 3).

In regard to business prospects over the next three years, no sizeable changes are forecast in comparison with recent years (Chart 4). Although the financial services & insurance industry and manufacturing firms saw a decrease in the response “expand,” 60-70% of these firms in each category still selected the response “expand” (Chart 5).

So, while on the one hand companies in Shanghai feel the effects of the economic situation on their own business perfor-mance, it is clear that the majority of them tend to anticipate a trend toward expansion of their business in the future.

2008 Office Needs Report of Shanghai

Ohters

To purchase/build the corporate building

Reconstruction of current building

To highten the security level

To set up a new branch or

representative office

To set up a new

company/new

regional headquarters

To achieve higher status

For better building facilities

For better location/accessibility

To lower the cost

To integrate offices

To decrease the office

To expand the office

10% - 19% 20% - 29% 30% - 39% 40% - 49%0% - 9% 50% -

Industry To increase the office

To decrease the office

To integrate offices

To lower the cost

For better location/ accessibility

For better building facilities

To achieve higher status

To set up a new company/ new regional headquarters

To set up a new branch or representative office

To highten the security level

Reconstruc-tion of current building

To purchase/ build the corporate building

Others

Manufacturing

Non-manufacturing

Financial institutions

The most popular destination area for office relocation is the Lujiazui area (28%). This was followed by “Hongqiao development zone” (19%) and “Huai Hai Road area” (15%) (Chart 12).

A breakdown by business category shows that the Lujiazui area is most popular among the financial services & insurance industry and non-manufacturing businesses Lujiazui. In fact, over half of the firms in the financial services & insurance industry selected Lujiazui as their area of greatest interest (Chart 13).

Popular area for office location４

・ The Lujiazui area received the highest level of interest as a destination for office relocation.・ “Image of the district,” “Concentration of financial institutions,” and “Quality of office build-ings” are the appealing aspects of the Lujiazui area.

Chart 12 Areas of interest as a relocation destination

2004(N=208)

2005(N=276)

2006(N=415)

0%

10%

20%

30%

40%

31%

23%

15%13%

9%

6%

3%

13%

9%

5%

14%

20%

17% 17%15%

11%10%11%

7%6%

35%

22%

- 4 -

2007(N=662)

31%

14%15%

12%

10%

3%

＜Evaluations of the Lujiazui area＞Given as the top three aspects that positively affect business in the

Lujiazui area, which won the highest degree of support, were “image of the district (78%),” “concentration of financial institutions” (75%), and “quality of the office buildings” (68%). These are percentages that exceeded last year’s figures. In addition, the evaluation “Degree of concentration of firms/clients” was given by 8% more than last year.

In contrast, given as the negative elements were “rent” (67%), “facilities to support living” (38%), “pedestrian environment” (35%), and “cultural and recreational facilities” (20%) (Chart 14). Deteriorating perceptions of the pedestrian environment are probably due to the effects of infrastructural construction of late in the Lujiazui area: This was cited by 7% as working to the detriment of the area.

As was the case in last year’s survey, the business community continues to offer better evaluations of the Lujiazui business environ-ment due to the high-quality office buildings and concentration of financial institutions. However, it also continues to hope that the appeal of the area can be enhanced by urban infrastructural improvements that improve deteriorating pedestrian space, etc. and an increase in the on-site office building facilities that comprehensively support a higher standard of office life.

0

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78 75 68

44 384126 24

1316 89 6 2 2 0 1

0 1 819

6 1 213

3512

3820

67

11 5 61

16% 8% 14% 3%

27% 17% 14% 10% 14% 5%

52% 7% 15% 8% 13% 3%

14%

12%

2%

2008 survey result (N=447)

2007 survey result (N=662)

28%

17%19%

15%

9%

4%

12%

2008(N=447)

18% 28%

0%

20%

40%

60%

80% 76 73 6443 3933 25 22 1514 106 5 3 1 0 2

80%

60%

40%

20%

0%1 2 5

206 1 2

1428

12

3826

64

13 8 61

2008 Office Needs Report of Shanghai

＜Reasons for office relocation＞Similar to last year’s findings, the top three reasons for office

relocations given were “to increase office space” (71% – the top reason), “for better building facilities” (44%), and “for better location/accessibility” (34%) (Chart 10). This indicates that there is strong demand for large, high-quality office buildings, regard-less of the business category (Chart 11).

Chart 13 Breakdown by business category of the most interested area as office location

Industry Lujiazui Hongqiao People’sSquare

NanjingWest Road

Huai HaiRoad

Bund Others

Manufacturing

Non-manufacturing

Financial institutions

10% - 19% 20% - 29% 30% -0% - 9%

Chart 14 Business envitonment in Lujiazui (multiple choice)

＜Positive＞

＜Negative＞

Area im

age

Grow

ing number of

financial institutions

Better quality of offices

Environm

ent with

greenery and water

Infrastructure

Grow

ing number of

clients in the

　

area

Future economic and

other potentials

Business opportunities

Favorable government

policies

Good pedestrian

environment

Proxim

ity to govenment

offices

Living support facilitiesin the area

Cultural facilities

Rent

Housing

School

Others

Lujiazui 　　　　Hongqiao　　　 People’s Square　　　Nanjing West Road

Huai Hai Road　　　 Bund 　　 Others

Shanghai EXPO Sites

Lujiazui Stn.Century Ave.

Fuxing Rd.(E) Tunnel

Yan’an Rd.(E) Tunnel

Renmin Rd. - Dongchang Rd. Tunnel (Under construction)

Lujiazui Green Land

Shanghai World Financial Center

Huanpi Rd.(S) Stn.

Central Henan Rd.YanAn Rd.(E)

Changshu Rd. Stn.

Hengshan Rd. Stn.

Central Huaihai Rd.

Central Fuxing Rd.

Fuxing Park

Xujiahui Stn.

Hongqiao Rd.

Hongqiao Park

Zhongshan Rd.(W)

Zhongshan Park

Zhongshan Park Stn.

Jing’an Temple Stn.Nanjing Rd.(W

)

YanAn Rd.(W)

Jingan Park

People’s square Stn.

Shimen No.1 Rd. Stn.

Shanghai Station

Zhongshan Rd.(N)

YanAn Rd.(M)

People’s square

People’s Park

Zhon

gsha

n Rd

.(N)

Henan Rd.(M) Stn.

The Bund Sightseeing Tunnel

Xinjian Rd. - Pudong Rd.(N) Tunnel (Under construction)

Nanpu Bridge

Lupu BridgeDapu Rd. Tunnel

Xizahn Rd.(S) Tunnel(Under construction)

Century Park

Longyang Rd. Stn.

Maglev

Yangpu Bridge

Dalian Rd. Tunnel

Yuyuan Garden

Fuxing Rd.(E)

Henan Rd.(S)

Dongfang Rd.

Tienshan Park

HongqiaoDevelopment Zone

West Nanjing Road Area

Central Huaihai Road Area

People’s SquareArea

ShanghaiBundArea

Lujiazui Area

0 2 4 6 8 10km

N

Office area map of central Shanghai

- 5 -

2008 Office Needs Report of Shanghai