APPD Market Report Article


February 22, 2024

Silvia Zeng, Head of Research, South China


RMB 159


Leasing demand recovers in finance and TMT sectors

  • Guangzhou’s economy continued to show positive signs in the finance and consumption sectors. However, businesses maintained a cautious approach in the face of various challenges, refraining from extensive office expansions or upgrades.
  • Notably, two leading public fund management companies committed to expansion at about 20,000 sqm each. Several companies in the TMT sector chose to either expand or upgrade their office spaces, taking up 3,000 to 4,000 sqm in the quarter.

Vacancy edges downward in 4Q23

  • A new Grade A office project, namely the Poly & SFC Mansion, was completed over the quarter in Guangzhou International Financial Town, contributing approximately 57,000 sqm to the total stock.
  • Although many existing projects still found it challenging to lease vacant space given the relatively subdued demand in general, robust absorption by anchor tenants in recently completed buildings pushed down the overall vacancy rate by 0.5 ppts to 21.4% in 4Q23.

Landlords give larger concessions on rents

  • An upturn in office leasing demand in the quarter could do little to help lift landlord confidence, especially when the majority of the enquiries came from companies with a fairly tight budget. Hence, landlords offered heavier rent cuts, particularly in ZJNT and Pazhou.
  • In the investment market, some vendors chose to reduce their asking prices as they reassessed the value of projects amid the current declining rent cycle, attempting to align with investors on investment yield expectations. As a result, the city-wide yield rose slightly q-o-q in 4Q23.

Outlook: Pressure on leasing market may persist

  • In 2024, demand in the office leasing market is expected to recover gradually, although business uncertainties may persist in several sectors. Moreover, self-use areas should partially support net absorption levels, with a large number of headquarter buildings entering the market.
  • A substantial new supply of around 0.65 million sqm is set to enter the market in 2024. Such a large influx of new supply is anticipated to exert pressure on the leasing market, as the vacancy rate for existing stock remained relatively high as of 2023. Consequently, landlords are likely to continue to give rental concessions.

Note: Guangzhou Office refers to Guangzhou's overall Grade A office market.

Talk to us 
about real estate markets.