China tier II office: To lease, perchance to dream, ay there’s the rub

June 26, 2011 / By

A sneak preview of what the subscribers to our China Tier II real estate data service will be receiving at the end of the week: Office leasing demand is picking up. Investors have long since discounted the possibility of serious volumes of office leasing demand in China’s Tier II and III cities, but have they been too hasty? Early returns from our recent field work indicate that net take of Grade A office space across a number of Tier II cities we track closely has increased substantially year on year.

How could this be? Don’t Chinese companies prefer to own their office space rather than rent it? Isn’t Tier II office all about strata title sales?

I don’t want to paint all cities with the same brush, but it could just be that capital values are getting high enough that even domestic companies are seeing the buy vs lease decision coming down on the side of leasing. This is good news for landlords and should be a wake up call to investors – there are viable commercial office markets beyond Shanghai and Beijing. For more detailed analysis of this important emerging trend, check out the China Real Estate Intelligence Service reports for 2011 Quarter 2.

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