The grade-A office space in Pudong, which is all located in Lujiazui, amounts to about 1.1 million square meters and account for 43 percent of all grade-A office space in Shanghai currently. Lujiazui should be home to more than half of the city's grade-A office space by 2010 with a number of new projects starting up over the next few years, according to the report by Jones Lang LaSalle, a real estate service company.

"The Lujiazui precinct has had a substantial share of the office supply since the mid-1990s, but vacancy has trended downward after spiking just prior to the Asian Financial Crisis in 1997. Tenant demand since then has been driven largely by the financial and banking sector," said Anthony Couse, the company's local managing director.

As much as 43 percent of all office space in Pudong has been taken up by banking and financial users since 1993.

LaSalle forecast the percentage will rise to 50 to 55 percent by 2010.

Last year, the State Council reaffirmed the positioning of the 31.78-square-kilometer Lujiazui area, as the only finance and trade zone among the 185 state-level development zones on the mainland.

Overall, grade-A office absorption in Lujiazui has averaged some 165,000 sqm over the last 10 years, and is likely to average 277,000 sqm over the next five, the report said.

Office rents in Lujiazui, which posted an average annual growth rate of 7.7 percent to date since bottoming out in 2000, is likely to grow some 27 percent over the next two years on strong demand, LaSalle said.

Tax benefits and incentives offered by Lujiazui have attracted more and more international and large domestic occupiers, the report said.

If a multinational company selects Lujiazui for regional headquarters, the company's employees will receive a tax rebate of 100 percent on personal income tax in the first year of operations.

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