Qianhai’s Grade A Office Market Awaiting Mature Infrastructure Environment

In the first half of this year, the Qianhai Shekou Free Trade Zone, which includes financial, modern logistics, information services, technology services, cultural creativity and other professional services, has continued to stabilise in progress and improve in quality. For the first time in H1 2018, the total revenue of registered enterprises in the free trade zone has exceeded RMB 500 billion, a year-onyear increase of 29%. The financial and modern logistics industries accounted for 69% of the economic value. Over the same period, the number of newly registered Hong Kong-funded enterprises reached 1,836, a 37% year-on-year increase. This was far higher than the overall 81% growth rate in Shenzhen, reflecting the immediate effect of the government's announcement this March, where residents from Hong Kong, Macao and Taiwan are exempt from applying for employment permits, on top of tax benefits and entrepreneurship subsidies introduced earlier. Affected by the entry of several new office projects and the maturing infrastructure environment, the occupancy of the Qianhai Grade A office market will not have much breakthrough in the next few quarters. It is expected that the proportion of the tertiary industry in the Qianhai CBD area of Shenzhen will increase, while there is still room for improvement in the number of registered enterprises in the future. The convenience brought by the completion of the Shenzhen Metro Extension South Line Project is expected to activate rental prospects in Qianhai's overall office market. Affected by the increase in supply, the vacancy rate of Qianhai office buildings will remain at a high level next year; the average monthly rent per square metre is expected to hover at approximately RMB 150. By 2020, Qianhai is expected to form several million square metres of construction space, determined to become an important service industry centre in the Asia Pacific region and an important base for service trade in the world. With new infrastructure and various major supporting facilities reaching perfect levels, rents and corporate occupancy may increase in later years.