Shenzhen Office Rent Drops for Ninth Straight Quarter
Rent for top offices in the South China tech hub of Shenzhen has been dropping for two years as vacancy rates remain high, and experts say 2021 is likely to see this trend continue.
Rent in top office buildings fell by 1.6% quarter-on-quarter in the last three months of 2020, marking the ninth straight quarter of decline and a 6.3% year-on-year drop, according to a report issued by real estate services provider Savills PLC on Thursday.
The report showed that the office vacancy rate stood at 27.9%, which marked a slight drop from the previous quarter but an increase from the year before. Shenzhen continued to have the highest office vacancy rate among the four first-tier cities — the others being Beijing, Shanghai and Guangzhou.
The office real estate market has been hit by the country’s slowing economic growth, a trend exacerbated by the coronavirus pandemic. Rent across the four first-tier metropolises declined in 2020, with Shenzhen recording the largest average drop of 12.8%, experts from property firm Cushman & Wakefield PLC said in a recent report (link in Chinese).
According to their estimates, Shenzhen’s office rent started to fall in the first quarter of 2019, and in December had fallen 23.55% from its peak at the end of 2018.
The abundant supplies of top offices in Shenzhen led to a higher vacancy rate, Cushman & Wakefield said. At the end of last year, the vacancy rate stood at 25.1%, 3.04 percentage points higher than the year before, the firm said.
At the end of 2020, supplies of top offices in Shenzhen amounted to about 8.3 million square meters, an expansion of 13.8% from the previous year, according to Savills.
However, some projects didn’t come onto the market in 2020 due to the pandemic, which means that newly-added supplies would likely increase more than expected, Savills said. The firm said that it will be a new normal for office supplies to remain high in Shenzhen and predicted that annual newly-added supplies on average will exceed 1 million square meters from 2021 to 2025.
Savills said that the Shenzhen office vacancy rate might keep climbing this year with the rent continuing to fall. Cushman & Wakefield, however, said that it expects the development environment of various industries in 2021 may be better than 2020, and the demand for offices is forecast to strengthen, slowing the pace of decline in rent.
Contact reporter Timmy Shen (firstname.lastname@example.org) and editor Joshua Dummer (email@example.com)
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