A new approach to analyse vacancy in Guangzhou’s offices

August 30, 2022 / By  


As existing office properties in Guangzhou gradually transition into the asset management phase, landlords long for a decision-making mechanism to quickly reduce vacant spaces and realise an optimal rental return. Under such circumstances, the JLL South China Research department has refined the conventional study of the relation between rents and vacancy rates, based on historical data in the Guangzhou Grade A office market.

Our approach

WNext, we considered the volume of new offices nearby versus the total stock at that time to simulate the pressure landlords experienced from external competitors. Combining both aspects, we can quantitatively define a vacancy anxiety index to measure landlords’ attitude on a quarterly basis. An increase in this index would represent a worsening of the landlord’s leasing performance, whereas a decrease would mean an improvement.

Here, we present results combining 21 Grade A office buildings in Guangzhou, where their historical net effective rents since 2017 were referred. As shown in Figure 1, the vacancy anxiety index demonstrates a significant connection to rental trends, with correlation coefficients of -0.95 and -0.91 in Guangzhou and Zhujiang New Town, respectively.

Figure 1: Average net effective rent against vacancy anxiety index in Guangzhou

Source: JLL South China Research


To explore the index’s applications in practise, we focused on five premium Grade A buildings in Zhujiang New Town which have highly comparable management services and are close to each other. Due to their advantages, they have often been regarded as direct competitors to high-profile tenants for site selection, thus we only considered their internal vacancy anxiety index.

The observations coincided with our initial hypothesis that a rise in total vacancy may not be the sole driver of landlords’ anxiety and rental declines. Instead, a sudden surge in newly released units of larger sizes (GFA at least 1,000 sqm) or a prolonged absorption deadlock with smaller units (GFA at most 300 sqm that have been vacant for at least three quarters) would hinder landlords’ bargaining power of rents. See Figure 2.

Figure 2: Detailed vacancy anxiety analysis of area and duration of five office buildings in Zhujiang New Town

Source: JLL South China Research
Note: a larger unit is one with a GFA of at least 1,000 sqm, a smaller unit is one with a GFA of at most 300 sqm;
a unit long been vacant is one that has been vacant for at least three quarters.


  1. In seven out of the eight previous cases, rents declined when the vacancy anxiety index arising from the current quarter’s newly released larger units surpassed the threshold (orange dotted line).
  2. In ten out of the eleven previous cases, rents declined when the vacancy anxiety index arising from abegging smaller units surpassed the threshold (blue dotted line).

Furthermore, we discovered that when larger units remained vacant for three quarters or longer, landlords became anxious about rental returns and steered leasing strategies to allow room partitioning for rapid space take-up, causing a more overt rental decrease.

Future Work

Looking forward, we aim to broaden our research coverage to multiple cities. Meanwhile, we shall reinforce the applications of our results in providing clients with tailored leasing strategies.

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