Cold Wave Of Office Buildings In The First Tier Cities: Vacancy Rate Rises And Rents Fall

The real estate market is not the most cold residential, but office buildings.

Since the beginning of this year, office vacancy rates in Guangzhou, Beijing, Shanghai and Shenzhen have continued to rise.

The adjustment of the economic structure and the change of industry are the fundamental reasons for the vacancy of office buildings. The continuous increase of supply has also increased the vacancy rate, and the supply of local areas is in short supply.

A number of third party organizations pointed out that the disruption of supply and demand will make office buildings in an excess of state to be adjusted for a long time.

It will take longer to see, and with the adjustment and upgrading of the economy and industry, the spring of the office market may take several years to come.

Vacancy rate increases rent pressure

Dead Leung Ban statistics show that over the past year, the vacancy rate of the overall office market in the first tier cities across the country has risen to the highest level in nearly 10 years, with an average of around 10% now. The average vacancy rate of office buildings in second tier cities is even higher, averaging about 28%.

In terms of rent, according to the China Index Research Institute, the rent of office buildings in the first tier cities in the fourth quarter of 2019 was 25% yuan higher than that of 75% yuan, while the rent of office buildings in second tier cities was 50% yuan higher than that in the second quarter, and 40.9% yuan lower than that of the previous period. 9.1% of them were unchanged from the previous period.

By the end of the three quarter, the average rent of the North Guangzhou Shenzhen office building was 389 yuan, 310 yuan, 178 yuan, and 233 yuan respectively, an increase of 2.5%, -1.6%, 1.1% and -3.7% compared with that of the first tier cities.

It is worth mentioning that in the first tier cities, office vacancy rate is seriously differentiated, the lowest is Guangzhou, and the highest is Shenzhen.

According to the data of the 2019 national office market macro report of 58 Anju guest, the vacancy rate of office buildings in Beijing, Shanghai and Shenzhen in the first three quarters of 2019 was 13.8%, 12.5% and 21.2%, respectively, which rose 3.2%, 2.4%, 1.8%, and the office vacancy rate of Guangzhou office remained lower than the end of last year, and continued to drop to 3.7%.

In the first quarter office market, according to Laifang's third quarter report data in 2019, there was no new project delivery in the third quarter of Grade A office market in Guangzhou. The current stock is 5 million 700 thousand square meters, the overall vacancy rate is 8%, the ring ratio is 1%, the main rental demand comes from the TMT industry, the Pearl River New City, Hebei, Yuexiu, Pazhou and other regional vacancy rates are below 10%.

On the contrary, although Shenzhen has the conceptual advantages of the first demonstration area, the main leasing demand is also the TMT industry. The market vacancy rate is not optimistic. The overall vacancy rate of Grade A office buildings in the third quarter is as high as 21.3%, and the vacancy rate of each market segment is generally over 10%. Among them, Qianhai is 47%, Huaqiang North 34.6%, Che Kung Temple 30.8%, Gao Xin Park 24.9%, and Futian Central District 15.1%.

The vacancy rate of office market in the next three years is also not optimistic, as new supply continues to increase. Laifang research department estimates that the new supply of Grade A office market in Guangzhou will be about 2 million 530 thousand square meters in the next three years, mainly in Pazhou and the hot spots in the financial city. With the completion of Pazhou Internet headquarters and other projects, the vacancy rate will gradually increase, and it will gradually decline after reaching its peak in 2020.

In Shenzhen, demand for rental market has been shrinking in the short run, and new office projects are still being completed. In the third quarter, four new projects in Grade A office market in Shenzhen were completed, mainly in Futian and Qianhai, and the stock rose to 7 million 250 thousand square meters. Laifang expects that in 2020 alone, about 1 million 200 thousand square meters of new projects will be completed in Shenzhen.

This is a long campaign.

Under the condition that the vacancy rate of office buildings in China is not optimistic, there are multiple factors affecting the vacancy rate differentiation.

Zhang Bo analysis, Shenzhen, the comprehensive rectification of the P2P industry led to the withdrawal of relevant financial enterprises, coupled with the substantial increase in new supply, which is the main reason for the increase of office vacancy rate. In Guangzhou, the continued decline in the vacancy rate is due to lower rental levels and fewer new supplies.

The increase of new supply has exacerbated the high vacancy rate of office buildings in Shenzhen. Davies, the first research department of Taiping Shenzhen, believes that a large number of new supply in Shenzhen has pushed up the vacancy rate. At least in the next six months, more owners will be offered more concession or preferential measures. The fourth quarter rent of Shenzhen office will also drop.

58 Zhang Bo, chief analyst of Anju Real Estate Research Institute, also said that the growth of new development area of office buildings this year has shifted from negative to positive. Developers are still actively expanding the office market, and the construction progress of office buildings is slow.

At this stage, under the environment of the overall economic downturn, faced with the high cost of rental costs, small and medium-sized enterprises are cautious in their expansion, and even run away. The demand for office buildings is much harder to improve in the short term.

But on the whole, many analysts believe that this is a long-term battle, not just a temporary gain or loss.

In the medium and long term, Chen Tiedong, senior director of the China Strategic Consulting Department of Laifang, said: "as the proportion of the service industry in Shenzhen's industrial structure continues to increase, and the dividend policy of considering the socialist demonstration zone will be gradually released into the technology, communications and finance industries in the next few years. It is expected that the market for Grade A office buildings will gradually warm up after 2020, and demand will rebound."

Historically, the low office rate of Beijing office has also benefited from the rapid development of the third industry. In terms of industrial structure, Shenzhen's second industry accounts for the highest proportion in the first tier cities. With the transformation from manufacturing to service industry, the third industry accounts for a larger proportion, and office demand is also expected to increase.

Although the overall market vacancy rate is grim, according to the data of Laifang Research Institute, in the third quarter, the office market of Gao Xin Yuan in Nanshan, Shenzhen, was more active, and attracted a considerable number of financial services and financial technology enterprises to enter the office market based on the rent level of half of the core business district.

Prior to the end of the second half of 2019, the office of the world's State Department of science and technology has also predicted that the domestic office will recover, because the policy will lead to more diversified office needs, such as Shenzhen, Qianhai and other local governments with rent subsidy policy to provide support for enterprises.

In addition, the demand side also has some noteworthy minor changes, such as joint office and other alternative office methods are being born.

With the popularity of joint office concept, SMEs in the past unable to afford class A office buildings also had opportunities to enter. According to the data of World Bank Richard, the market penetration of joint office in the three largest cities in North China has reached 6% at the end of the first quarter of 2019, despite the fact that the Wework market has crashed and the profit model has been questioned.

Zhang Bo believes that at this level, if developers or owners can consider bringing new business space solutions to meet the needs of more diversified office leasing, it is expected to reduce office vacancy rate in the future.