Flood of new supply to hit Suzhou’s office market

The outlook for the office market in Suzhou in Jiangsu province - the first city to impose austerity measures to cool the overheated commercial property sector - is bleak, as new supply will reach a record high this year and next, analysts say.

Frank Chen, executive director for China at property consultancy CBRE, said the overall office vacancy rate in Suzhou was 20 per cent, but in the grade A segment it was 31 per cent last year.

"Hit by a historic high in new supply this and next year, the vacancy rate in the office market is going to climb higher in the city," he said in CBRE's Shanghai office.

An estimated two million square metres is scheduled for completion in the next two years, largely in the 288 square kilometre Suzhou Industrial Park (SIP), of which 80 square kilometres belongs to the China-Singapore co-operative zone.

Taking into account the 1.47 million square metres in existing stock, this would raise potential supply to 3.4 million square metres over the next two years, he said.

Suzhou has the ninth-largest new supply of commercial properties, including office and retail space, according to a survey of 20 cities by Insite China, a real-estate management company in Beijing. Nanjing in Jiangsu province tops the list, followed by Hangzhou in Zhejiang and Xiamen in Fujian.

However, Suzhou - about 35 minutes by high-speed train from Shanghai - takes up an average of only 100,000 square metres per year of new supply, Chen said.