Office glut creeps up in Shenzhen, Beijing and Shanghai as trade war saps growth plans and start-ups move to co-working spaces
- Shenzhen’s office vacancy rate rose to 16.6 per cent at end of June, while Beijing’s was at 11.5 per cent, and Shanghai jumped to 18 per cent
- Four of 15 landlords of Shenzhen’s new office towers are major developers, rest are small builders, investment firms or conglomerates
A building frenzy in southern China’s answer to Silicon Valley has driven the vacancy in Grade A offices to a record high, putting the squeeze on part-time developers whose blind inexperience have led them into the industry.
Hubris and herd mentality added hot air to the bubble, as companies invested cash earned from elsewhere into property, in the belief that they too could profit from China’s economic growth.
Only four of the 15 builders of Shenzhen’s new office towers this year are major developers, while the majority are small builders, investment companies or conglomerates in manufacturing, health care, logistics and retailing.
“Some cash-rich companies from other industries have blindly joined the real estate sector, expecting to earn big bucks,” said Yan Yuejin, a research director at Shanghai-based E-House China R&D Institute.