Advertisement
Advertisement
Coronavirus pandemic
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
A residential compound in Wuhan, the epicentre of the Covid-19 outbreak. China’s lockdown measures have led to a surge in demand for online shopping, remote working solutions, online education and online entertainment. Photo: Reuters

China’s online gaming, education and work services come to office leasing market’s rescue amid Covid-19 outbreak

  • Online entertainment to boost office leasing in the immediate as well as long terms, JLL China says
  • Proportion of total leasing volume attributable to TMT sector to increase this year: CBRE

The growth in online services – mobile gaming, shopping, remote working and education – will boost office leasing demand amid the Covid-19 driven lockdown in mainland China, in a silver lining for the beleaguered sector.

Online entertainment will boost the office leasing in the immediate term, but is also expected to continue expanding once the pandemic has subsided, according to JLL China.

“The current epidemic has brought new development momentum to the online entertainment industry, and it is expected that a portion of people who took up gaming during the outbreak will maintain their gaming habits after the epidemic is over,” Daniel Yao, the firm’s head of research, said in Covid-19 and the China Office Market, a report published recently.

Overall demand for office space is expected to decline in China, but the country’s technology, media and telecommunications (TMT) sector has grown rapidly in recent years and is expected to provide a lifeline.

The mobile gaming industry in particular has grown at a compound annual growth rate of 24 per cent over the past five years, according to JLL China. And its growth is expected to accelerate further amid the outbreak, translating into increased office demand. China’s digital economy is expected to maintain an average growth rate of 10 per cent to 15 per cent, and this will translate into growth in office demand for the TMT sector as well, according to JLL China.

Property developers turn to TikTok, virtual consultants to realise Wuhan’s promise

The sector accounted for 26 per cent of the total leasing volume in China last year, the highest among all sectors, according to CBRE’s Greater China Real Estate Market Outlook 2020 report. And the outbreak could stimulate more office leasing demand from subsectors such as online gaming, education and enterprise online working services, according to Ada Choi, the firm’s head of research in Greater China.

CBRE said it expected the proportion of total leasing volume attributable to the TMT sector to increase this year, even as the total demand might dip by as much as 40 per cent year on year in the first quarter.

“With the population having spent time in home confinement, there has been a surge in demand for online shopping, remote working app solutions, online education and online entertainment,” said Shaun Brodie, senior director and head of occupier research, Greater China, at Cushman & Wakefield.

Covid-19 outbreak to have ‘devastating impact’ on Shanghai commercial property

Health care and insurance have also performed well amid the pandemic, according to JLL China. “Insurers are likely to upgrade office space and purchase properties for their own use, as their needs expand,” said JLL China’s Yao. They said expenditure in the medical and health sectors will also continue to grow after the outbreak, as demand for medicine, medical equipment and services increases.

On the other hand, industries requiring high degrees of person-to-person contact, including travel and retail firms, will be most sharply affected by Covid-19, according to JLL China. It said production and supply chain breaks will cause manufacturers and trading companies to reduce their office leasing demand in the near-term.

Office demand among sectors most affected by the virus, such as hospitality, food and beverages, transport and retail will be hit heavily by the coronavirus, according to CBRE.

Chinese cities introduce record number of measures to support developers

Once the outbreak has subsided, it is widely expected that tenants are likely to desire more flexible terms. “In the long-term, we feel companies will reassess their workplace strategy and may invest more in remote working platforms and flexible work space arrangements in their physical office space,” said Cushman & Wakefield’s Brodie.

Purchase the China AI Report 2020 brought to you by SCMP Research and enjoy a 20% discount (original price US$400). This 60-page all new intelligence report gives you first-hand insights and analysis into the latest industry developments and intelligence about China AI. Get exclusive access to our webinars for continuous learning, and interact with China AI executives in live Q&A. Offer valid until 31 March 2020.

Post