Cost-saving relocations continue to dominate the leasing demand in Shenzhen

• In light of the prevailing macroeconomic and operational uncertainties, leasing demand in the quarter remained mostly motivated by cost-savings.
• Recently completed projects, particularly those in Qianhai, contributed significantly to net absorption, offering attractive rental options with improved facilities in line with tenants’ desire for cost savings and operational efficiencies.

Strong take-up in recently completed projects drives the citywide vacancy rate down

• During the second quarter, no new Grade A office buildings were completed in Shenzhen.
• The citywide vacancy rate declined slightly by 1.0 ppt to 24.6% q-o-q, with significant improvement in vacancy rates seen in certain newer projects in Luohu District and in emerging precincts in Nanshan District.

Rents stay on a downward trajectory due to oversupply

• Tenants continued to prioritise cost control amid business uncertainty. Hence, landlords offered greater rental incentives to compete for the limited pool of active leasing demand. Therefore, rents experienced a further decrease in the second quarter.
• Institutional investors were generally cautious about Shenzhen’s office properties, and so the investment demand was tepid. Certain high-standard strata-titled office projects and industrial parks continued to draw interest from industrial buyers for self-use in Q2 2024.

Outlook: Rents may continue to fall as tenants’ affordability tightens

• Over the next 12 months, there is expected to be over 1.6 million sqm of new Grade A office supply in Shenzhen. The city’s overall vacancy rate is likely to surge with future supply pressure.
• As Shenzhen’s office market supply-demand imbalance is likely to persist and tenants’ rental budgets are likely to stay tight, citywide rents are expected to remain under downward pressure.