A CapitaLand unit has entered into a conditional agreement with an unrelated party to acquire a commercial site in Shanghai for 838 million yuan (S$171 million).
The site is next to CapitaLand's Innov Center, an operational office block with ancillary retail that was acquired in June. The centre is about 40 per cent leased.
The adjacent site is CapitaLand's second investment in Shanghai's office market in six months.
CapitaLand China plans to develop the plot into a Grade A office with a total gross floor area of 37,765 sq m.
The total investment for the new office, including land cost, will be about 1.3 billion yuan.
Construction will begin early next year. It will be the only new Grade A office supply in the Wujiaochang district when it is completed in 2020.
CapitaLand China chief executive Lucas Loh said the new office extension will feature specifications different from Innov Center to widen the appeal for prospective tenants.
The combined gross floor area of the two office developments will amount to 118,466 sq m.
CapitaLand's portfolio of commercial assets under management in Shanghai will be over 1.4 million sq m in gross floor area across 19 properties once the deal is completed.
CapitaLand president and group chief executive Lim Ming Yan said: "This latest acquisition affirms our confidence in China, which is an important core market for CapitaLand.
"With Shanghai set to overtake Hong Kong as Greater China's largest office market by 2020, we are optimistic about the growth prospects in this sector."