Owner-occupier demand supports the market

• In Q1 2025, Guangzhou’s net absorption reached approximately 65,000 sqm, driven by self-use areas in new headquarters in Pazhou and end-user buyers moving into purchased offices in GZIFT, many of which are TMT firms.
• Meanwhile, leasing activity contracted in general as tenants prioritised cost containment, reflecting ongoing caution with real estate expenditures.

Vacancy rate down marginally by 0.1 ppt

• Vacancy rates of stock projects in emerging areas continued to improve, especially for self-use in GZIFT and the uptake of recently completed offices in Pazhou, mostly driven by cost-cutting leasing initiatives.
• However, the completion of a new office building in Pazhou, with over half of the space remaining to be leased out, as well as tenant loss in established submarkets, added to the overall supply pressure.

Weak demand continues to challenge rent performance

• Since leasing demand has been primarily driven by cost-saving strategies, price competition persisted. Citywide rents decreased by 3.1% q-o-q, a slightly widening margin from the previous quarter.
• In certain projects experiencing tenant attrition, landlords have implemented unprecedented rent concessions and various incentives, including customised furnishing, provisional over-time HVAC and parking.

Outlook: Business uncertainties likely to hinder leasing activities

• Over the next 12 months, the Pazhou and GZIFT submarkets are poised to experience a significant influx of new supply, with around 1.3 million sqm of office space slated for completion.
• Approximately one-quarter of the new supply is anticipated to be owner-occupied, providing some support to net absorption. However, under the persistent demand-supply imbalance, rents may continue falling.