(Yicai Global) July 20 -- Lease transactions of high-quality offices in China's southern tech hub of Shenzhen remained strong in the first half owing to robust demand from financial and technology companies.
Average rents for the highest-rated A-grade office spaces grew steadily hitting an all-time high of CNY245 (USD36) per square meter, states a report from commercial real estate services firm Colliers International.
Financial and tech firms account for half of all rentals of A-grade space, Zhou Zhihui, director of office building services at Colliers International's Shenzhen branch told a Yicai Global, adding that other customers mainly come from professional services and advanced manufacturing.
Shenzhen's total A-grade office inventory hit 5.4 million square meters in the first half of this year, up by more than one-quarter on the year before. The new supplies could lead to a higher vacancy rate in the future from 13.6 percent at present.
The city also saw a rise in the number of large-scale office lease transactions during the first six months, often involving multi-story premises. In terms of transaction value, drone giant DJI Innovations contract for 15 floors at the Rongchao Houhai Building in Nanshan represents Shenzhen's biggest deal in the first half, followed by Great Wall Securities' lease of ten floors in the South Tower of Futian Energy Building. Guosheng Securities and WeBank also leased 4 floors each in the period.
Meanwhile, industry insiders pointed out that the office building supply and demand situation in Shenzhen districts have already shown signs of polarization, and this trend may continue.
"In Houhai and Qianhai areas of Nanshan district, the vacancy rate edged up due to the large volume of new supplies in recent years," Xie Jingyu, director of South China market research department at Savills told Yicai Global. "Futian district, by virtue of its economic status and infrastructure status, is still favored by businesses as the ideal location, and its vacancy rate has declined significantly."
Multiple service consulting firms including Colliers International, Jones Lang LaSalle, and Savills expect that large areas of new grade-A office space will be completed soon.
Among them, Colliers International predicts that over the coming three years, more than 6 million square meters of new grade-A office building areas will be added, equivalent to the supply volume of creating a new city. By that time, the vacancy rate citywide may go up to 30 percent, bringing downward pressure on rents.
The compound growth rate of rents among Shenzhen's grade-A office buildings has reached 5.1 percent since 2008, data from Colliers International shows. This is considerably higher than those of Shanghai at 2.8 percent, Guangzhou at 1.8 percent, and -0.4 percent in Beijing.
Editor: William Clegg