Corporate self-use gives support to the overall office demand in Q4 2024

• Due to tightening budget control in most companies, the overall leasing demand in Guangzhou lacked growth momentum. Meanwhile, newer projects in emerging submarkets with competitive rents encouraged cost-saving relocations and upgrades.
• The quarter’s net absorption stood at 77,000 sqm in Q4 2024, which is comparable to the average of the previous four quarters. However, the owner-occupied area of this space exceeded 80%, while leasing demand stayed feeble.

Four projects launch

• Four projects were completed in Q4 2024, one of which is the wholly self-use headquarters of Sanqi Interactive Entertainment, a local gaming company, and the others are mainly for rent.
• Due to new supply and certain companies moving out from Grade A offices in central business districts, the average vacancy rate increased moderately to 21.0%.

Rents stay on a downward trend

• Landlords continued to cut rents to compete for the limited demand with a generally tighter rental budget. Moreover, certain projects very close to year-end occupancy targets offered extra discounts to new signings to help them meet KPIs.
• To combat rising uncertainties about future occupancy, investors demanded higher yields amid weaker investment sentiment, restricting the total investment transaction volume.

Outlook: Short-term supply likely to hinder leasing market recovery

• Over 1.2 million sqm of Grade A office supply is expected in the next 12 months. Meanwhile, a few existing projects have been informed about anchor tenant departures in 2025. Together, the level of competition will soon escalate, resulting in rents sliding further.
• Despite corporate self-use, the overall leasing sentiment has yet to improve enough to be able to catch up with the short-term supply boom. Therefore, the average vacancy rate may keep on rising throughout 2025.