Rental demand for grade-A office space in Shenzhen is likely to remain sluggish in 2023 as oversupply will continue, according to real estate consultancy Jones Lang LaSalle (JLL).
The recovery of demand cannot immediately keep up with the massive new supplies — a record high of more than 2 million square meters. The overall vacancy rate is estimated to rise more than 3 percentage points in 2023, JLL said.
The annual net absorption of grade-A office buildings in Shenzhen was about 830,000 square meters in 2022, only about 60% of that in 2021. More than 50% of the top-tier office space was for the use of corporate headquarters, statistics from JLL showed.
Rental demand for grade-A office space from the financial industry was relatively stable last year, and emerging or high-tech industries such as semiconductor, new energy vehicles and gaming also saw a significant increase in office leasing.
In 2022, the overall rent of premium office buildings in Shenzhen fell 6.5% year on year. The rent decline widened in the second half compared with the first half of last year.
Real estate brokerage firm Savills expected structurally higher vacancy rate of grade-A office space in Shenzhen this year as rental demand is still at low levels.
At the end of 2022, Shenzhen’s vacancy rate of premium office buildings rose 2.2 percentage points year on year to 24.9%, according to a Savills report.
The rental competition is expected to intensify with large new supplies, further pushing down the rent on average, Savills said.