Skip to content

Vacancy Rate for China’s Commercial Office Space Nears Thirty Percent

Three major commercial office transactions have taken place in China in the past month. On June 28, Capital Land sold six Raffles City locations to Ping An Life Insurance for 9.6 billion yuan (US$1.5 billion). The week before, SOHO China sold 91 percent of its stock shares to the Blackstone Group for US$3 billion. On June 7, Hexie Health Insurance acquired SK Tower in Beijing for 9.06 billion yuan (US$1.4 billion). Three large commercial real estate transactions within 22 days totaled approximately 38 billion yuan (US$5.9 billion), a rare phenomenon in the industry. Insurance companies, asset managers and other institutions are acquiring commercial real estate in China at a moderate price.

According to statistics from the Beike Research Institute, a real estate industry think tank, the average annual growth rate of commercial office space over the past decade has exceeded 10 percent. By 2020, the total area of commercial business premises was 2.9 billion square meters (31 billion square feet). The estimate for sales of commercial real estate in 2021 approximates 2.6 trillion yuan (US$0.4 trillion).

Office buildings in China feature low rental yields, sloppy operations and high vacancy rates. In the second half of 2020, commercial office vacancy rates in first-tier cities were all above 20 percent, representing ten-year highs. The measure in Shanghai and Shenzhen even exceeded 25 percent. The national average vacancy rate for commercial office space is close to 30 percent.

Source: Central News Agency, July 2, 2021