Emerging sectors sustain active leasing demand

• Guangzhou’s Grade A office market sustained its recovery momentum, with tenant decision-making remaining rational and pragmatic. Leasing activity was primarily fuelled by cost-saving relocations and consolidations, as well as upgrades at manageable costs.
• Driven by AI integration and Chinese brands expanding overseas, emerging industries such as gaming, beauty, and cross-border e-commerce expanded rapidly. Together, they generated key incremental demand, accounting for 65% of expansionary and upgrade-driven transactions.

Steady absorption of existing projects keeps the vacancy rate stable

• A newly completed project in GZIFT added approximately 128,000 sqm of new supply. Despite leasing pressure from the new completion, steady absorption in existing projects kept the citywide vacancy rate stable, edging up only 0.2 ppt q-o-q to 22.6%.
• Alternative property uses increasingly supported vacancy absorption. In the quarter, roughly 11,000 sqm of office space was converted into hotel use, lowering leasable supply and softening vacancy pressures.

Rental decline continues to narrow

• This steady stock absorption lifted overall market sentiment, slowing the consecutive drop in citywide average rents to just 1.2% q-o-q in Q2 2026.
• Pazhou led the recovery with a marked deceleration in rental declines, strongly supported by leasing demand and thus firming landlord pricing expectations.

Outlook: Demand growth is expected to maintain resilient

• Emerging sectors are expected to continue generating incremental leasing demand. Driven by the rapid expansion of live-streaming MCNs, overseas digital marketing, and AI SaaS, more mid-sized firms are set to upgrade to Grade A office spaces.
• An influx of roughly 650,000 sqm in the next 12 months is projected to put upward pressure on citywide vacancy. However, supported by persistent demand recovery, the full-year rental decline in 2026 is expected to moderate relative to 2025.