Surplus of Commercial Properties Means Dimming Prospects for China

Posted on 4 September, 2012 by Jodee Redmond

An overabundance of office space in some parts of China is having an impact on that country’s commercial property sector, leading to lower prospects for growth in the economy. In some centres, such as Beijing and Shanghai, office rents are still on the increase, however, but other cities are not having the same level of success, according to Colliers International.

Grade A office rents were down by 0.3 per cent in Guangzhou in the second quarter. In Chengdu, rents dropped by 3.54 per cent over the first quarter numbers. Vacancy rates rose during that time as new office towers became available to the commercial tenant market.

Demand for office space among domestic companies in the IT, media, and insurance sectors remained strong in Guangzhou, according to the property consultancy firm. Multinational companies in that city have slowed down their expansion plans.

In contrast, office rents in Beijing and Shanghai have increased in the second quarter. In Beijing, high-end office rents were up by 4.2 per cent, on average, in the second quarter over the first three months of 2012. Shanghai’s office rents grew, with increases of 3.6 per cent over the same period. Strong demand in the two cities, along with a lack of new inventory worked to keep rental prices up.

China’s economic growth slowed in the second quarter to 7.6 per cent, which is its slowest pace in the past three years. The latest economic data is suggesting that it will stay sluggish in the near future.

Even though the country’s growth rate has slowed, it is still higher than other developed nations, according to some property consultants who are still bullish on China’s commercial property market. Other analysts are starting to warn about a large increase in new office and retail properties coming onto the market over the next few years as being too much supply for the market which will lead to lower rents.




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