China’s office vacancy rates rise in top cities as growing oversupply of premium space hits amid economic malaise

In Shanghai, the vacancy rate for grade-A office space is expected to reach 19 to 21 per cent by the end of the year

High levels of new inventory are about to hit the market in top cities including Shanghai, Beijing, Guangzhou and Shenzhen, putting pressure on rents

Reading Time:3 minutes

Office chairs are seen in an office building formerly known as the Evergrande Center in Shanghai on June 18, 2023. Photo: Bloomberg

Published: 9:30am, 17 Jul 2023

Companies in China’s top-tier cities will have a good chance to reduce office rental costs in the second half of the year due to a faltering economy and an increasing supply of new space.

With vacancy rates on the rise in Shanghai, Beijing, Guangzhou and Shenzhen, rents will continue to drop as landlords come under pressure to sign leasing agreements, according to property consultancy CBRE.

In Shanghai, the mainland’s commercial and financial hub, the vacancy rate of grade-A office space is expected to reach 19 to 21 per cent by the end of the year, compared to 18.7 per cent in June, while average rents could decline by as much as 0.5 per cent.

Tenants now pay 9 yuan (US$1.26) per square metre per day for grade-A office space, down 2.2 per cent from a year earlier when Shanghai lifted a two-month citywide Covid-19 lockdown and 1.1 per cent lower than in the first quarter of 2023.

Pudong’s Lujiazui Financial District in Shanghai, pictured on June 21, 2023. The amount of available premium office space in the city is set to nearly double in the second half of the year, according to CBRE. Photo: Bloomberg

“China’s economy and property market failed to live up to expectations after the reopening,” said Sam Xie, head of research at CBRE China. “Newly built office space to hit the market [in the coming months] will benefit corporate tenants as they will have bargaining chips to negotiate with landlords on rent rates.”