Aerial photo taken on Aug 13, 2020 shows a view of Shenzhen, South China's Guangdong province. (PHOTO / XINHUA)
Shenzhen’s commercial property market showed a trajectory of steady recovery in the first quarter as businesses emerging from the shadow of the COVID-19 pandemic continued to increase their demand for offices, according to real estate services provider Savills.
From Jan to March, 406,000 square meters of Grade-A offices came onto the market, bringing the total volume to over 8.7 million square meters
Net absorption of Grade-A office space in Shenzhen increased to 283,000 square meters in the first three months of this year from 276,000 square meters recorded in the fourth quarter of 2020 and 93,000 square meters in the third quarter of 2020, the company said.
“This shows businesses are embarking on a path of steady recovery, which leads to their growing demand for offices,” Ray Wu, managing director of Savills Shenzhen, said at a press briefing in the city on Tuesday. “Meanwhile, the strategy adopted by landlords of offering preferential prices to tenants is also showing effect, stimulating greater demand.”
“It is because of these reasons that the city’s average vacancy rate for Grade-A offices stood roughly flat at 28 percent in the first quarter despite the large amount of new supply, rising only 0.1 percentage points from the previous quarter.”
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From January to March, 406,000 square meters of Grade-A offices came onto the market, bringing the total volume to over 8.7 million square meters.
“Given limited supply projected in the second quarter, downward rent prices and the government’s preferential policies on industrial development, we expect office demand to continue to grow and vacancy rate to remain stable in the coming three months,” he said.
Average monthly rents for Grade-A offices in Shenzhen dropped 0.5 percent quarter-on-quarter to 184.7 yuan (US$28.2) per square meter as of the end of March.
Wu acknowledged that the vacancy rate in Shenzhen is now standing at a relatively high level compared with Beijing, Shanghai and Guangzhou, but stressed that the issue should be viewed from a longer perspective.
“We shouldn’t focus on the vacancy rate at the moment,” Wu said. “Rather, we should see it in the time frame of a decade. Ten years ago, no one knew DJI, the world’s largest drone maker based in Shenzhen, or ever thought of its creation. Shenzhen is growing so fast. The city’s large office supply provides sufficient industrial space for businesses to develop in the future,” he said.
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Wu said an increasing number of international companies are planning to set up regional headquarters or offices in Shenzhen, which is expected to further boost its commercial property market.
“We have also seen a trend of Hong Kong small and medium-sized enterprises setting up offices in Shenzhen since the second half of 2019. Although the moves were disrupted by the COVID-19 pandemic in 2020, they are expected to resume this year,” he added.