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With more than a quarter of Shenzhen’s prime offices vacant, landlords turn to hotels

Global realtor Cushman and Wakefield predicts the tech hub’s commercial property market will continue to struggle in 2024, forcing landlords to switch up their strategies.

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UPDATED: 05 Jan 2024, 7:57 am

At the end of 2023, the overall vacancy rate for grade A office buildings in Shenzhen stood at 26.1 percent, Yicai Global reports – citing US-headquartered commercial real estate services firm Cushman and Wakefield (C&W)’s latest market survey.

Unable to find corporate tenants, many of the city’s commercial landlords were considering renting their spaces to hotel operators, said the deputy head of C&W’s research arm, Zhang Xiaoduan.

High supply and depleted demand were behind the 3.2 percent year-on-year rise in vacancies. A near record 846,000 square metres of new office space were added to the Shenzhen market in the fourth quarter of 2023, according to C&W.

Previous C&W data indicates this was the first time Shenzhen’s grade A office vacancy rate had exceeded 25 percent since early 2021, when China was imposing strict Covid-19 restrictions.

[See more: Macao residents can now buy more property in Shenzhen]

However, other real estate services providers have pinned the rate even higher. UK-based Savills had it at 27 percent for the second quarter of 2023 – one of the highest rates in the country.

Increasing supply has led commercial landlords to lower rent to an average of 186.50 yuan (US$26) per square-metre, a year-on-year drop of 8.4 percent.

It is worth noting that rents for grade A office space started decreasing steadily at the end of 2018, before the pandemic took hold in late 2019. They plateaued between the fourth quarter of 2020 and the first quarter of 2022, and have been in gradual decline since then, according to C&W.

The company predicted that rent for office space in Shenzhen will continue to drop across 2024, due to a slow pick-up in demand.

UPDATED: 05 Jan 2024, 7:57 am

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