Since the middle of last year, the rental market for Shenzhen's office buildings has garnered much attention due to changes in market conditions. In the first quarter of this year, the overall office rent in Shenzhen fell by 5% from the final quarter of 2018 to around RMB 264 per square metre. The withdrawal of some financial industry tenants in the Futian district has also caused a large drop in rent, to RMB 287 per square metre. In fact, Shenzhen's commercial developers have changed their business model from developmen­t and sales to developmen­t and self-sustainabi­lity. Some will be leased by second-hand landlords, and then rented to other merchants. Although they pocket the rental difference, these second-hand landlords also bear the risk of poor market conditions. If the market environmen­t deteriorat­es, there will be a large number of office buildings waiting to be rented, and more favourable leasing policies (such as rent reduction) will need to swiftly be provided to high-quality tenants to avoid project occupancy rates deteriorat­ing. Fortunatel­y, the current boom in the technology and commerce sectors has helped alleviate some negative impacts of the current decline in demand of the financial sector's leasing market.

In the medium- and long-term, the proportion of Shenzhen's tertiary industry has indeed been rising, activating demand for commercial properties from different industries, especially with new office projects. According to the Hong Kong Trade Developmen­t Council, the proportion of Shenzhen's tertiary industry has gradually increased from 50.5% in 2008 to 58.7% in 2018. Over the same period, the proportion was 80.9%, 69.9% and 71.8% in Beijing, Shanghai and Guangzhou, respective­ly. Meanwhile, according to szhome.com, three new projects in the Baoan district were pre-sold in the first quarter of this year, increasing new supply by 141,854 square metres (or 751 units). The total transacted first-hand area was 142,944 square metres (or 1,077 units), an increase of 6% year-on-year. The OCT Tower in the Nanshan district had a total sales area of 52,200 square metres (or 175 units) in the firsthand office market, topping the list. In the same period, the second-hand market transactio­n area was 30,187 square metres (or 256 units), up 2.1% year-on-year. The average price of office buildings remained stable at RMB 52,924 per square metre.

With the integratio­n of Shenzhen and the neighbouri­ng Guangdong cities with Hong Kong and Macau into the Greater Bay Area, the attractive­ness of Shenzhen's office sector to foreign institutio­nal investors is expected to increase. As Shenzhen's office market has hit its peak supply period according to market news, we can expect competitio­n between new projects to increase in the coming two years, which may lead to more large transactio­ns in Shenzhen's office buildings.




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