WHILE Grade A office rentals in Puxi reached record levels over the past quarter, Pudong rents are starting to flatten out with an increased supply, the latest industry statistics show.

For the second quarter, rents rose 3 percent in Puxi and only 1.2 percent in Pudong, with the overall figure for the city growing 2.4 percent from a quarter earlier, the world's leading real estate services provider, Jones Lang LaSalle, said yesterday.

"Puxi offices remain highly sought after, driving Puxi rents up another 3 percent over the previous quarter," said Anthony Couse, managing director for Jones Lang LaSalle Shanghai. "Meanwhile, Pudong's new buildings continue to prove popular with financial institutions in pursuit of quality."

In Pudong, the second half of 2008 is expected to witness the handover of several Grade A office buildings including Shanghai World Financial Center, Jasper, Mirae Asset Tower, China Fortune Tower and Global Finance Tower, putting increased pressure on landlords.

Asking rents have kept up with the aggressive growth but achievable rents have begun to slow as landlords have had to become more flexible in negotiations. For instance, Azia Center, a premium Grade A office tower in Lujiazui, has lowered rents substantially as tenants move to nearby buildings.

New buildings in Pudong still remain attractive with nearly half of the space in Pudong's new 2008 buildings already committed. Finance sector companies from home and abroad continue to be the driving force. A good example is the Bank of Communications Schroders Fund which has leased 4,400 square meters in Standard Chartered Tower.

However, on the Puxi side, scarce premium Grade A space has pushed asking rents as high as 18 yuan (US$2.64) per square meter per day. Asking rents in The Center, a building acquired recently by the US investment fund Asia Pacific Land Ltd at a price of 4.438 billion yuan, reached 20 yuan per square meter per day.