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Grade A office rents remain stable in top cities

By Cherry Cao | January 21, 2016, Thursday | Online Edition

GRADE A office rents will generally remain stable this year in China's four first-tier cities but facing downward pressure in most second-tier ones amid abundant supply, international real estate services provider CBRE has forecast.

Nationwide, about 9.3 million square meters of Grade A spaces are scheduled to be released to the market in 2016, according to a report released today by CBRE, which tracks 17 major cities across the country. Among them, more than half, or 53 percent, will be located in emerging areas of those cities.

"In first-tier cities, where the supply-demand situation is comparatively balanced, office rents are expected to remain stable or rise modestly," said Frank Chen, executive director and head of research at CBRE China. "However, in many second-tier ones, southward pressure seems obvious as supply is huge but demand remains soft."

New supply of Grade A offices in the country's four first-tier cities is supposed to fall 1.6 percent this year from 2015 while that in second-tier ones is predicted to jump 22 percent, according to CBRE data.

Domestic tenants will remain the dominant driving force in the country's Grade A office leasing market while multinational corporations, particularly professional service providers and high-end manufacturers, will experience quite robust office expansion demand, the report said.

In terms of vacancy, Guangzhou will be the only first-tier city to see an above 10 percent rate by the yearend whereas only four second-tier cities -- Nanjing, Hangzhou, Ningbo and Dalian -- will see their vacancy rate stay below 20 percent by the end of this year, according to CBRE's forecast.

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