Skyscrapers border a lush green landscape in Shenzhen's central business district. (PHOTO PROVIDED TO CHINADAILY.COM.CN)
Although the relaxation of COVID-19 restrictions is expected to improve business sentiment and push up office demand, rental prices in Shenzhen’s commercial property sector will continue on a downward trajectory in 2023 due to oversupply, according to international real estate services provider Savills.
Seventeen new projects will come into operation this year, adding 1.45 million square meters of Grace-A office space to the Shenzhen market. That will bring the total to 11.45 million square meters by the end of 2023, up 14.5 percent from a year earlier, it said.
The vacancy rate of Shenzhen’s Grade-A offices stood at 24.9 percent as of the end of last year, 2.2 percentage points higher than the previous year
“As new office supply will hit a record high this year, we expect the city’s overall vacancy rate to keep going up. Against the backdrop, landlords may choose to lower rentals to cope with the intensifying competition and that will push the city’s average rental prices down,” said Carlby Xie, head of southern China research at Savills.
READ MORE: Flexible working space set to outshine office leasing market
The vacancy rate of Shenzhen’s Grade-A offices stood at 24.9 percent as of the end of last year, 2.2 percentage points higher than the previous year. Average monthly rentals dropped 4.3 percent year-on-year to 177.1 yuan ($26) per square meter.
“While companies in the sectors of finance, TMT (technology, media, telecom) and professional services will remain the major tenants for high-end offices in the future, an increase in demand is expected to be seen in emerging industries, including new energy vehicles and life sciences,” Xie said. Shenzhen is ramping up efforts to help high-tech industry play a bigger role in its economy.
On the residential side, Savills said it expects the lifting of COVID-19 curbs and the loosening of financing policies to have a limited impact on boosting Shenzhen’s housing market in the short term, as Chinese mainland homebuyers will still mainly take a conservative approach this year amid the debt crisis among property developers and a widespread drop in home prices in different cities.
READ MORE: Shenzhen's Grade-A office rents jump on strong demand
The transaction area of Shenzhen’s new homes declined by 31.5 percent on a yearly basis to 3.89 million square meters in 2022, the lowest level in nearly four years, according to the firm. But supported by several new residential projects in the city’s core areas, the average transaction price rose 9.6 percent year-on-year to 70,217 yuan per square meter last year.