Trade war could crimp demand for China’s office space by 3 million square metres as businesses downsize, CBRE says
- Slowing economy, headwinds in financial and tech sectors, as well as new office supply could lead to decline in rents in 10 out of 17 cities
- Hard to determine impact of trade war in 2018, but tariffs will have bigger affect this year
An area equivalent to 13 of China’s tallest buildings could be hurt if the ongoing trade war between the United States and mainland China deteriorates, as businesses downsize their offices, demand to pay less rent or move to cheaper locations, according to a forecast by CBRE.
As much as 3 million square metres (32.29 million square feet) of existing office space, about 10 per cent of the office space in seven out of 17 Chinese cities CBRE covers, could be affected by the trade war, according to the real estate services firm.
The situation will be further complicated by a slowing economy, headwinds in the financial and technology sectors, as well as a glut of new office supply. These factors could weigh on rents in these cities, with 10 out of 17 possibly reporting declines in rent of as much as 4 per cent.
“We have seen sporadic cases of vacated premises [in 2018] directly caused by the trade war,” said CBRE China’s research head, Sam Xie. “We estimate that its effect will be more pronounced this year, especially as corporate decisions gradually make their way through the market.”
He said the projection is based on an analysis of the office structure in 17 Chinese cities -how many existing tenants are directly exposed to trade war risks such as those in the trade, manufacturing and mining sectors.
“The increasing uncertainty is the biggest impact of the trade war. It is not only reflected in a few sectors but across all sectors. Corporate heads are not sure how things will turn out. Even if a deal is concluded they will ask, ‘will this affect us’?” said Johnson Lin, director of commercial at Savills Beijing.