Chinese cities see surge in office rental costs

Nine of the 16 Chinese cities tracked in the SCMP-DTZ/Cushman & Wakefield office rental index witnessed triple-digit year-on-year growth last year.

The index focuses on office rental performance in the 16 cities. It was launched with a base value of 100 in the first quarter of 2013.

Nine cities recorded generally moderate rise in office market rents year on year while seven recorded varying degrees of decline, shows the latest quarterly survey. Changsha, Chongqing, Nanjing, Qingdao, Shanghai, Tianjin, and Xi’an all recorded net absorption last the year at historically high levels.

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Despite a continued wave of office completions and the prospect of substantial supply hitting the market soon, office rents in Shenzhen and Shanghai have risen by 0.3 per cent and 1.9 per cent quarter on quarter, and 7.9 per cent and 4.4 per cent year on year. While the office market in Shanghai has been boosted by the Free Trade Zone, Qianhai has raised the demand in Shenzhen.

These two are among the nine cities that recorded generally moderate rise in office rents year on year.

In Dalian, a rising tide of bankruptcies by microfinance and peer-to-peer financial companies have caused tenant dislocation, in turn prompting owners of the city’s prime office properties to protect themselves against leasing risk by raising the standards for incoming tenants, said Andrew Ness, head of research for greater China at DTZ/Cushman & Wakefield.

This move towards greater exclusivity caused Dalian Grade A rents to tick up 2.7 per cent quarter on quarter.