43 / 62
cushmanwakefield.com
/
43
the average vacancy rate remained quite low (below 7%)
between 2011 and 2015. Consequently, overall vacancy in
the six Tier-1 markets was 10% at the end of 2016 and is
projected to increase to a record 17% in 2019.
Higher vacancy rates will inevitably place downward
pressure on rental growth, which is expected to
gradually soften from 1.6% in 2016 to sub-1% by
2019 across Greater China. Still, the market is
not likely to experience a notable rental drop.
This is due in large part to the quality of new
projects set to come online and replacement
of some existing lower-quality buildings
raising the profile of China’s Class A office
market. Worth noting is that the majority
of upcoming office projects are located
in decentralized or emerging areas as
part of wider city government plans
CHINA’S
ECONOMIC GROWTH RATE
HAS
SLOWED, BUT IS STILL ABOVE 6.5% AND THE
SERVICES SECTOR REMAINS A BRIGHT SPOT.
NEARLY 200 MSF OF
NEW OFFICE SUPPLY
IS EXPECTED
TO ENTER CHINA’S FOUR TIER-1 CITIES, HONG KONG AND
TAIWAN OVER THE NEXT THREE YEARS, RAISING THE
TOTAL STOCK OF THE SIX MARKETS TO 564 MSF.
HIGHER VACANCY RATES
WILL INEVITABLY PLACE DOWNWARD
PRESSURE ON RENTAL GROWTH, WHICH IS EXPECTED TO
GRADUALLY SOFTEN FROM 1.6% IN 2016 TO SUB-1% BY 2019 ACROSS
GREATER CHINA.
A
NOTABLE RENTAL DROP IS NOT LIKELY
TO BE EXPERIENCED DUE
TO THE QUALITY OF NEW PROJECTS SET TO COME ONLINE. THE NEW
PROJECTS WILL REPLACE EXISTING LOWER-QUALITY BUILDINGS AND
RAISE THE PROFILE OF CHINA’S CLASS A OFFICE MARKET.
THE
MAJORITY OF UPCOMING OFFICE PROJECTS
ARE LOCATED IN DECENTRALIZED
OR EMERGING AREAS AS PART OF WIDER CITY GOVERNMENT PLANS TO CREATE AND/
OR GROW FUTURE BUSINESS DISTRICTS.
GREATER CHINA OFFICE VACANCY
Source:
Cushman & Wakefield Research
0%
3%
6%
9%
12%
15%
18%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019