Shenzhen’s office landlords offer leisure areas, huge pantries as they compete to woo tech firms amid record vacancy levels

28-Oct-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

Landlords of premium office space in Shenzhen are having to go beyond cutting rents to lure tenants, providing customised facilities flexible arrangements to attract the fast-expanding tech firms as vacancy reached a record in the special economic zone.

There was close to 2.4 million square metres of empty space about 13 times the gross floor area of Hong Kong’s IFC towers in Shenzhen in the third quarter, according to CBRE, while JLL said the vacancy rate stood at a record 27.8 per cent in October.

“We see companies from the sectors of technology, media and telecom as ‘new-economy’ firms”. With the outbreak of Covid-19, there has been higher demand for the services provided by these new-economy firms and we are seeing these firms account for about 60 per cent of the new office leasing in Shenzhen,” said Martin Wong, head of research at Knight Frank.

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New-economy enterprises have each been taking up between about 10,000 sq m and 100,000 sq m (107,640 sq ft to 1.07 million sq ft) of office space so far this year, said Jex Ng, managing director for South China at JLL.

They need larger spaces because they provide employees, who often work more than 12 hours a day, with entertainment and leisure areas, and spacious pantries.

“Owners who wish to attract new-economy companies should consider providing facilities that can stimulate the creativity of employees and provide catering services in the work space,” said Ng.

He said landlords also needed to adapt to the greater flexibility in leasing terms often demanded by their new-economy tenants.

One notable transaction recently was a large internet firm needing 10,000 sq m of fully furnished office space for just one year as it planned to hire an additional 1,000 employee on a short-term basis.

On top of the short lease, this tenant also asked the landlord to provide a 1,300 sq m staff canteen, according to JLL.

Online youth education firm Shenzhen Dianmao Technology said it would expand its office capacity by adding another 15,000 sq m in Shenzhen, Guangzhou and Wuhan next year, according to an email interview with the Post.

“We will hire more than 2,000 staff next year,” said the firm, which has rented 20,000 sq m as its headquarters in the Sinlikang Building in Shenzhen’s Qianhai commercial district.

“Our office has unobstructed sea views. Our staff can take sunset selfies and we also provide an area for employees to play with cats,” it said in a written reply.

Ng forecasts that new-economy enterprises will account for 30 per cent of total leasing transactions, or 300,000 sq m, this year.

An excess supply of office space dominates the Nanshan district, home to such Chinese technology behemoths as Tencent, ZTE, and drone maker DJI.

In the third quarter, the city’s average rents continued to decline, slipping 1.75 per cent from the previous three months to 219.01 yuan per sq m per month, said Cushman and Wakefield.

“[New-economy firms] do not necessarily have to pay high rents to secure space, as the Shenzhen office leasing market is undergoing de-stocking,” said Wong.

Most of these firms are looking for locations in the Nanshan and Qianhai areas, where newer buildings with larger footprints are available.

“Many (landlords) have adopted more flexible leasing approaches, including lowering entry requirements, executing pre-leasing plans earlier, adjusting rental levels and offering higher agency commission incentives,” Zhang Xiaoduan, head of research for South China and West China at Cushman & Wakefield, said in the latest report on the Shenzhen office market.


Category: China

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