The office leasing market has long been one of the best sub-indices for gauging general economic activity. Prices, demand and the overall mix of tenants provide a snapshot of broader change and serve as an accurate pointer to future investment trends.
That accounts for the close attention to deals and developments in the mainland's office sector. What happens there is significant for the likes of architects, agents and property companies. But economists and fund managers around the world are also becoming adept, for example, in the distinction between tier-one and tier-two mainland cities as they search for clues to new investment prospects and future sources of profit.
'For most companies, China remains one of the few markets still exhibiting top-line growth,' says Michael Klibaner, head of China research at Jones Lang LaSalle. 'But multinationals are shifting their focus away from exports towards capturing a share of the domestic market in their respective industries. In the process, they are keen on expanding in the more inland regions to tier-two and tier-three cities like Chengdu, Wuhan, and Chongqing, so we are seeing demand for new set-ups there.'
Klibaner notes that strata-owned buildings are the mainstay of such markets, where most local companies still prefer to own their office space. However, this is changing, with many cities now building central business districts (CBDs) to meet and spur demand for higher-quality grade-A office premises.
The new supply coming on stream puts a limit on landlord pricing power in the traditional core areas, where vacancy rates tend to be low. And it creates options to either buy or lease for businesses keen to upgrade and expand.
Developers know what is required and design accordingly: high ceilings, adequate lifts, column-free layouts, and easy access to shops and transport. Where possible, they also aim to provide buildings with single-ownership and reputable property managers.
'Traditionally, multinationals have understood the value of locating in high-quality buildings in terms of brand image, convenience, staff attraction, and retention,' Klibaner says. 'Increasingly, domestic companies are demanding similar levels of quality and for similar reasons.'