Opinion | Empty office buildings point to deeper malaise in China's wealthiest region
Authorities built waves of new towns believing demand would continue unchecked for decades
Municipal officials in the Yangtze River Delta are learning a hard lesson: excitement over a flourishing regional economy can be dangerous.
According to property firm Jones Lang LaSalle, vacancies in Grade A office buildings in the area's major cities will stay high in the coming years due to weaker-than-expected demand.
While a loan default by a developer in Zhejiang sparked fears of a collapse of the residential property sector, the situation in the office sector appears to be even worse . Residential property developers can at least slash prices to dispose of flats to recover part of their investment. Half-empty buildings, however, are not just white elephants but financial black holes.
Jones Lang LaSalle found that at the end of last year, vacancy rates for Grade A office buildings stood at 58 per cent in Wuxi, Jiangsu, and 30 per cent in the Zhejiang capital, Hangzhou . In other major delta cities, which together make up the most vibrant and developed regional economy on the mainland, vacancy rates also hovered around 30 per cent last year.
Reshuffles of officials led to dramatic changes in urban development plans
In Wuxi, the vacancy rate for Grade A office buildings was expected to stand at 48 per cent in 2016, it said. By the end of that year, the stock of prime office space in the city would nearly triple from last year's amount to 565,000 square metres.