Focus on Shenzhen offices rental with Eric Chong – Commercial Real Estate Specialist at JLL Property Hong Kong.
The Shenzhen high-end office sector recorded a rental increase of 17% in the third quarter of 2014. This has primarily been driven by strong demand among the Qianhai-Shenzhen-Hong Kong Modern Service Industry Cooperation Zone.
Here, economic vitality creates new demand for office space from the professional service industry
Shenzhen and its commercial real estate market
Bordering Hong Kong, Shenzhen was named China’s first Special Economic Zone more than 25 years ago. Today it is a dynamic commercial centre, with the most notable business districts in in Lo Wu and Futian.
Shenzhen is a popular location for businesses, who thrive on the economic opportunities to live and work in a Chinese commercial centre, whilst benefiting from the proximity of Hong Kong’s sophistication and networking strengths. Grade A office buildings like King Glory and Seibu, are set to become available in Lo Wu soon. In Futian, CITIC Plaza and The Landmark are among the newest rental opportunities.
The finance sector and Shenzhen
Demand for Hong Kong office rentals is coming from banking, finance, energy and other sectors, a trend mirrored in Shenzhen as discussed by JLLProperty Experts. Here, economic vitality creates new demand for office space from the professional service industry. In terms of net absorption, Shenzhen reached a record high of just over 450,000 sqm in 2013, the highest recorded among Tier I cities for prime locations. .
Technology and Shenzhen
Shenzhen houses many leading domestic hi-tech giants such as Tencent (the parent of WeChat), Kingdee (software), and Huawei (hardware). In 2013, the hi-tech segment accounted for 32% of Shenzhen’s GDP.
Whilst many Hong Kong offices and Chinese cities are dealing with slowing economic growth, manufacturing overcapacity and cost-conscious MNCs; in Shenzhen emerging technologies, including IT & communications, energy, and biomedical and materials science, are among the most prominent drivers of growth. Property management is becoming increasingly competitive, and finding office space is becoming more challenging.
Shenzhen ascends while others slow
Shenzhen’s growth is in stark contrast to other major Asian cities that are experiencing a slowdown. In Seoul, rental uptake demand fell by 1.2% in Q3 2014, while in Singapore, tech centre leasing demand remained stagnant over the same period. Australian cities have also shown falling leasing demands.
Future predictions: real estate will continue to grow in 2015
Direct commercial real estate investment across Asia Pacific in 2015 is expected to exceed 2014 levels. Over USD200 billion worth of capital is available for investment in the Asia Pacific real estate market in 2015.
Stuart Crow, Head of Asia Pacific Capital Markets, JLL, commented, “There are a considerable number of private equity funds approaching maturity across Asia Pacific, however, the volumes of capital available in the market will easily absorb these disposals. Given the level of capital being allocated to real estate in Asia Pacific, demand continues to outpace the amount of assets available and the biggest challenge facing the market is a shortage of supply of investable product.”
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