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China’s Office Vacancies Soar Amid Slowing Economy

China’s economy is showing signs of weakness as business activity slows. According to Chinese media reports, office vacancy rates in major cities have hit multi-year highs in Q2 2023, indicating weak demand. In Beijing the citywide vacancy rate reached 18.3%, the highest level in 13 years. Many of China’s other megacities saw similarly high vacancy rates. Vacancies in Shenzhen and Shanghai were 20.3% and 18.7%, respectively.

Caijing magazine reported that international real estate firm Savills found vacancy rates in Beijing at 13-year highs. Industry sources said the office rental market is struggling with widespread price reductions in 2023. Client demand has dropped significantly, with only 2-3 prospective tenants per month compared with an earlier rate of 2-3 per week.

Negative net absorption of 53,000 sqm in Beijing in Q2 shows a continuous tenant exodus. With weaker demand, rents are falling across major markets. According to Savills, average Beijing office rents dropped 1.5% quarter-over-quarter, now largely back to 2012 levels.

Other top Chinese cities had similar trends. Shanghai, Guangzhou and Shenzhen saw Grade A office vacancy rates of 18.7%, 17.5% and 20.3% respectively in Q2 per Colliers data. Cushman & Wakefield data shows vacancy rates in Beijing, Shanghai, Guangzhou and Shenzhen increased year-to-date, now at 16.9%, 18.6%, 18% and 24.5%, respectively.

The rise in vacancies stems from oversupply amid weaker than expected demand growth, signaling China’s economic downturn.

Source: Central News Agency (Taiwan), August 21, 2023