Shenzhen office market gains steam on tech and services demand, but vacancies remain high
Leasing activity in core districts is picking up, driven by tech occupiers, but analysts warn oversupply will keep vacancies elevated
Technology firms are increasingly gravitating towards premium office space in Shenzhen’s core business districts, offering a degree of support to the city’s office market. However, vacancies are expected to remain elevated in the near term as a wave of new supply continues to outpace demand, analysts said.
The city’s technology sector – spanning artificial intelligence, consumer electronics and robotics – remained a key driver of leasing activity, particularly in western submarkets such as Nanshan and Bao’an. This concentration of demand should provide some near-term support, said James Macdonald, head of research for China at Savills.
“While tech demand is growing, it is still insufficient to rebalance the market in the short term,” Macdonald said, noting that tech-related occupiers accounted for less than 30 per cent of total leasing demand. “That limits their ability to offset broader pressures.”
Supply remains the dominant factor shaping market conditions. About 2.26 million square metres (24.3 million sq ft) of new office space is expected to be completed this year, lifting total stock by nearly 18 per cent and prolonging the current supply cycle. As a result, vacancy levels are likely to stay high, with rents facing continued downward pressure over the next few years.
In the first quarter, several major technology firms signed leases totalling around 25,000 square metres, including expansions and large new tenancies. Robotics companies were particularly active, taking up roughly 20,000 square metres of industrial space, according to JLL.
By the end of the quarter, vacancy rates for grade A offices edged down to 25.9 per cent, a decline of 0.5 percentage points from the previous quarter, JLL said.
“As AI develops rapidly and technology companies emerge, expand and upgrade, they are increasingly seeking higher-quality office space in core business districts and innovation hubs,” said Lulu Shi, director of Asia-Pacific corporate ratings at Fitch Ratings. “This is supporting absorption, particularly in grade A buildings, and providing some resilience despite softer real estate conditions.”