A Cushman & Wakefield Research Publication - 2017 Global Forecast

GREATER CHINA OFFICE VACANCY

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CHINA’S ECONOMIC GROWTH RATE HAS SLOWED, BUT IS STILL ABOVE 6.5% AND THE SERVICES SECTOR REMAINS A BRIGHT SPOT.

NEARLY 200 MSF OF NEW OFFICE SUPPLY IS EXPECTED TO ENTER CHINA’S FOUR TIER-1 CITIES, HONG KONG AND TAIWAN OVER THE NEXT THREE YEARS, RAISING THE TOTAL STOCK OF THE SIX MARKETS TO 564 MSF.

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Source: Cushman & Wakefield Research

the average vacancy rate remained quite low (below 7%) between 2011 and 2015. Consequently, overall vacancy in the six Tier-1 markets was 10% at the end of 2016 and is projected to increase to a record 17% in 2019. Higher vacancy rates will inevitably place downward pressure on rental growth, which is expected to gradually soften from 1.6% in 2016 to sub-1% by 2019 across Greater China. Still, the market is not likely to experience a notable rental drop. This is due in large part to the quality of new projects set to come online and replacement

HIGHER VACANCY RATES WILL INEVITABLY PLACE DOWNWARD PRESSURE ON RENTAL GROWTH, WHICH IS EXPECTED TO GRADUALLY SOFTEN FROM 1.6% IN 2016 TO SUB-1% BY 2019 ACROSS GREATER CHINA.

A NOTABLE RENTAL DROP IS NOT LIKELY TO BE EXPERIENCED DUE TO THE QUALITY OF NEW PROJECTS SET TO COME ONLINE. THE NEW PROJECTS WILL REPLACE EXISTING LOWER-QUALITY BUILDINGS AND RAISE THE PROFILE OF CHINA’S CLASS A OFFICE MARKET.

of some existing lower-quality buildings raising the profile of China’s Class A office market. Worth noting is that the majority of upcoming office projects are located in decentralized or emerging areas as part of wider city government plans

THE MAJORITY OF UPCOMING OFFICE PROJECTS ARE LOCATED IN DECENTRALIZED OR EMERGING AREAS AS PART OF WIDER CITY GOVERNMENT PLANS TO CREATE AND/ OR GROW FUTURE BUSINESS DISTRICTS.

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