Monitoring data released by Savills shows that in the fourth quarter of 2020, the rental index for Grade A office space in Shenzhen fell by 1.6% sequentially and 6.3% year-on-year. This is the ninth consecutive quarterly decline in rents, while the office vacancy rate also reached 28%, ranking first among the four top tier cities.
According to Caixin, Savills data showed that Shenzhen’s Grade A office vacancy rate decreased by 1.8 percentage points in the fourth quarter of last year from a year earlier, but rose by 2.9 percentage points to 27.9% year-on-year.
In addition, as rents fell, the selling price of Grade A office space in Shenzhen also declined, with the average selling price of office space in the city falling 9.1% year-on-year to 47,900 yuan per square meter in the fourth quarter of 2020. Residential prices, however, rose sharply, with data from the Communist Party’s National Bureau of Statistics showing that in November 2020, Shenzhen’s primary and secondary residential price indices rose by 4.9% and 14.6% year-on-year, respectively.
The report attributed the decline in office rents and the rise in vacancy rates in Shenzhen to the large number of new office buildings entering the market and the large increase in supply. 180,000 square meters of new Grade A office space was added in Shenzhen in the fourth quarter of 2020, and together with the first three quarters, a total of 14 projects with 1.05 million square meters of new space entered the market for the year.
However, some commentators believe that the increase in supply is only one of the reasons, mainly caused by the decline in market demand. According to the commentator Wen Xiaogang, capital is invested in the market for profit, and these funds are invested in office buildings because they see that there is a great market demand for office buildings in Shenzhen, but because of the blow of the plague on the economy, especially the decline in foreign trade, coupled with the Chinese Communist Party’s rectification of the financial market, many financial companies, similar to P2P and other Internet financial companies have basically closed down. Rents will decline.
Not only in Shenzhen, but also in the first-tier cities of Beijing and Shanghai, office rents are declining and vacancy rates are rising.
According to DTZ, vacancy rates in Beijing’s citywide and five core business districts rose to 16.6 percent and 11.2 percent respectively in the third quarter of last year, both reaching record highs in a decade. According to Colliers International, the vacancy rate in the Beijing office market stood at 17.5% in the third quarter, up about 1% quarter-on-quarter.
While vacancy rates are rising, office rents are declining. In the third quarter, rents in the city and in the five core business districts fell by 2.8% and 2.9%, respectively, with rents in the Financial Street business district, which has the highest rent level in the country, falling by 2.8% in the third quarter.
Some landlords in Beijing have lowered office rents and increased incentives in order to attract tenants.
Also according to CCTV Finance last December 21, the vacancy rate of premium office buildings in Shanghai was 20.4% in the third quarter of 2020, while the vacancy rate in Qiantan and Da Hongqiao reached 40%.
As for the direction of Shenzhen office buildings this year, Savills believes that the vacancy rate of Shenzhen’s Grade A offices will rise again in 2021, with tenants dominating the trade and rents in the city continuing to fall.
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