Leasing sector enjoys growth
Domestic companies have become the key drivers of office leasing in Shenzhen, as foreign businesses remain conservative on expansion due to the uncertain economic environment, according to Sunny Zhang, director of research for Cushman & Wakefield China.
The uncertainty is coupled with a slowdown in Shenzhen's economy. 'Shenzhen recorded an annual growth of 5.8 per cent in GDP in the first quarter, the lowest since the Special Economic Zone was set up in 1980,' Zhang says.
According to a report released by the firm, while the first quarter of 2012 saw a fairly lethargic grade-A office market, rents still continued to grow as a result of deliveries of new high-quality supply to the market. In the first quarter, grade-A net effective rents rose to 288 yuan (HK$353) per square metre per month, with a quarterly growth of 7.5 per cent. Futian district saw grade-A net effective rents grow by 8.1 per cent in the first quarter to 295 yuan per square metres per month. Luohu district had a quarterly rise of 8 per cent to 285 yuan per square metre per month, while Nanshan district registered an increase of only 1.7 per cent. Meanwhile, the Shenzhen vacancy rate has risen due to new supply. Overall vacancy rates rose by 3.2 per cent in the first quarter to 19 per cent as a result of the continuous new supply.
In Futian, the completion of Kerry Plaza's third tower brought the vacancy rate to 17.9 per cent - 7.4 per cent higher than the fourth quarter of 2011. However, in Luohu district, the vacancy rate fell from 31 per cent to 28.4 per cent and, with no new supply over the past few quarters, the vacancy rate in Nanshan district remained at a low 0.2 per cent.
Zhang says Futian and Luohu remain the market focus. 'With a mature business atmosphere and ancillary facilities, these submarkets are more attractive to tenants. On the other hand, tenants looking for large office space will have more options.'
The supply and demand of office space in Shenzhen are also expected to be affected by the city's renewal plans announced in February.
'After over 30 years of rapid growth, Shenzhen lacks land resources for development. The plan will make available within the currently confined traditional commercial areas, more space for development. Several renewal projects under construction are complex with high quality office buildings. Their completions will bring vitality to the traditional commercial areas that have not seen any new supply over the years,' she says.