New enquiry volume moderates

• Cost-saving remained the dominant strategy in the leasing market. A limited number of market transactions were recorded in Q2 2024, as the majority of tenants opted for lease renewals to avoid additional fit-out costs.
• Emerging submarkets with lower rents and an abundant selection of newly completed buildings, namely Pazhou and Guangzhou International Financial Town, remained attractive to budget-conscious tenants with relocation or upgrade needs.

Vacancy stays flat without new supply

• No new completions were observed in Q2 2024. The demand for expansions in emerging submarkets contributed to a slight amount of positive net absorption in the overall market, and the vacancy rate remained at around 21%.
• Recently completed buildings improved their occupancy with low rents. The average vacancy rate of buildings that were completed since 2019 has dropped by almost 2 ppts q-o-q.

Average rents decline amid weak demand

• A limited pool of potential clients on a generally tighter budget pressured rents downward. Meanwhile, landlords offered more favourable terms during lease renewal negotiations to retain existing tenants. The citywide rents dropped by 2.1% q-o-q.
• Little improvement in investment sentiment was observed in Q2 2024. The citywide yield continued to decompress moderately as investors asked for higher risk premiums given the unstable leasing market.

Outlook: Self-use demand likely to support net absorption in 2024

• Emerging submarkets will take advantage of proximity to upgraders and attractive rents to secure a steady transaction volume. Self-use space in company HQs, to be completed in the next 12 months, will support net absorption in these submarkets.
• However, an influx of over 1 million sqm of new supply is expected in the next 12 months, posing vacancy pressure on the overall market. Adding to the insufficient incremental demand, citywide rents are expected to keep declining.