Hong Kong firms show increased interest in Qianhai office space, JLL says
- Hong Kong firms have shown increased interest in Qianhai, the economic zone neighbouring the city
- Insurance firms, family offices and private banks have accelerated moves to enter Shenzhen to tap opportunities in the region
Southern China’s tech hub Shenzhen has seen increased demand for office space in the Qianhai special zone from Hong Kong companies, particularly the insurance industry and family offices, according to real estate firm JLL.
Hong Kong firms have shown a special interest in Qianhai, the economic zone neighbouring the city, and they have moved from initial investigations to taking action since the reopening of the Hong Kong-Shenzhen border earlier this year, Alfred Li, head of office leasing advisory at JLL Shenzhen, said in a media briefing on Thursday.
“One of the most notable industries is Hong Kong’s insurance sector, which has shown keen interest in moving into Shenzhen as a foothold for further expansion in other parts of the Greater Bay Area, such as Guangzhou and Foshan,” Li said.
Qianhai was their preferred choice of destination in Shenzhen due to its proximity to Hong Kong and the advantages in terms of the costs of office space and hiring, on top of the favourable policies offered by the district to attract businesses.
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Family offices and private banks from Hong Kong have also accelerated moves to enter Shenzhen to tap opportunities in the region, Li added.
The renewed interest in Shenzhen’s property market comes after a gradual recovery of the macroeconomy in the post-pandemic era, although the revival faces uncertainties and unbalanced development in different sectors.
Shenzhen’s overall office leasing market continued to face pressure in the second quarter of 2023 due to weak demand from tenants and an increase in new office space, according to JLL. Demand from the tech sector shrank in the first six months of 2023, while the professional services industry, including accounting and law firms, showed a notable increase.
The rental prices in the second quarter for grade A office buildings in Shenzhen fell 2.5 per cent sequentially, a steeper fall compared to the first quarter of 2023, while the vacancy rate stood at 22.6 per cent.
While many tenants tend to renew their current lease as a cost-saving measure, some have taken the rental rate fall as an opportunity to upgrade their office space, with half of the moving deals in the second quarter coming from companies that moved into grade A buildings from less premium spaces.
For the second half of 2023, Li expected the office leasing market to face further pressure with a record-high influx of 1.7 million square metres of new grade A office space.
“Most of the tenants will continue to hold on to their cautious strategy in the face of complexities in the domestic and global economies,” Li said.
The premium retail leasing market in Shenzhen has seen its rates stabilising in the second quarter, with a better-than-expected rebound in the food sector contributing to around 40 per cent of the leasing deals in the first half of 2023, according to JLL.
The customer traffic for restaurants has returned to the pre-pandemic level in 2019, which is the strongest segment for retail leasing, while fashion retailers are still struggling to deal with the lingering impact of the pandemic, said Silvia Zeng, head of research for South China at JLL.
According to a separate report by China Index Holdings on Thursday, China’s residential property market has failed to continue its recovery momentum in the second quarter of 2023, due to a rapid fall in homebuyer sentiment and weaker-than-expected government policies.
Prices for new homes have continued to stagnate in the first six months of 2023, while the second-hand market has declined further, according to the report.
For the second half of 2023, more supportive policies are needed to curb the downward trend of the residential property market, which the report expects to return to normal in the next two years.
