Press release: Mailland China Grade A office report of Q2 2012 | TCBC: Bao cao thi truong van phong hang A cua Trung Quoc – Quy 2 2012
Demand for Grade-A offices in major Mainland cities remained strong during the second quarter of 2012. The ongoing expansion of multinational and local companies continued to drive up Grade-A office rents. Office sales volume and prices also increased, as the central government showed no signs of relaxing regulatory measures in the residential sector, which shifted funds to the commercial market
Demand for Grade-A offices remained steady, as domestic and international businesses were still eager to expand and look for prime space. Even new projects achieved high pre-lease ratios. Expansion and renewal demand was particularly strong among international firms in the IT, law and consulting fields, while demand from domestic businesses involved in financial services was also notable.
Grade-A office vacancy rate dropped 0.2 percentage point to 3.3%, with net absorption reaching 131,227 sq m. Grade-A office rents continued to rise given limited availability, growing 4.6 percent quarter on quarter to RMB378 per sq m per month. However, expansion demand in some fields started to curtail, as office rents have successively hit new record highs. Net absorption dipped for three consecutive quarters and rental growth also began to slow.
Beijing Fortune Resource International centre D1 and D2, Raycom Info Tech Tower D and Guoson centre are expected to come onto the market in the second half of this year, providing 243,917 sq m of new Grade-A office space. Grade-A office demand is expected to remain strong in the near future and the overall vacancy rate is likely to decrease further. However, rents are reaching their peak and we expect them to remain steady or increase modestly by 3-5%.
Rents for Grade-A offices continued to rise, by 2.1 percent quarter on quarter, reaching RMB281 per sq m per month, while the vacancy rate dropped 1.3 percentage points to 5.4%. Shanghai’s investment market was also active and a large number of major transactions were recorded, with their total consideration reaching over RMB10 billion.
Grade-A office demand was strong, with multinational and domestic corporations establishing new businesses and expanding existing operations. Availability
in premium buildings — including Wheelock Square, ICC and Shanghai World Financial Centre — was extremely limited and their average rent exceeded RMB395 per sq m per month. The average office rent in West Nanjing Road, Jing’an District reached RMB365 per sq m per month.
The attraction of Shanghai has risen steadily and an increasing number of multinational corporations and international brands are choosing to enter Shanghai. The Shanghai economy continues to show stable growth. The Grade-A office market is expected to continue its uptrend in 2012, with a growth rate for the whole year of 6-8%. Although about one million sq m of Grade-A offices will come on stream in 2012-2013, the vacancy rate is expected to stay at a low Mainland Grade-A office rents and prices further up with expansion demand level of 5.5-7.0%, given strong demand.
Guangzhou’s Grade-A office market remained robust, with the volumes of supply, completions, sales and leasing deals all increasing. The investment market was particularly active, with sales volume increasing 135 percent quarter on quarter.
The average sales price increased 1.5%. There were two notable transactions in Pearl River New City: Guangzhou Honda purchased the entire block of the 46,000-sq-m Poly Zhong Da Square for RMB1.4 billion, while Fuliyingkai Square was the first Grade-A office building in Guangzhou to sell for over RMB40,000 per sq m.
The relatively stable domestic economy continued to boost expansion demand.
Guangzhou’s leasing market improved, with leased area rising 10 percent and rents growing 0.5%. Traditional Grade-A offices in Tianhe and Yuexiu Districts were particularly sought after, resulting in further decreases in their vacancy rates.
Office rents are expected to remain stable, as supply levels will slightly surpass demand in the near future. However, on the investment front, with the decreasing availability of low-priced offices, sales prices still have room to rise.
Several Grade-A office buildings are due for completion this year, including Pearl River Tower and Guangzhou Bank Building.
Their total area is expected to reach about 400,000 sq m. In June, Evergrande Real Estate bought a site at an auction in the non-core area of Pearl River New City for an accommodation value of about RMB33,000 per sq m, close to the sales price of existing office buildings in Pearl River New City.
This makes it the most expensive land in Guangzhou and an investment that to a certain extent will boost Guangzhou’s commercial real estate market. In the second quarter of 2012, the year-on-year economic growth of China was 7.6%, the lowest in three years.