Since China’s central government lifted stringent COVID-19 restrictions in December 2022, the country’s economy is on the mend. Both social mobility and spending data have rocketed, especially during the Chinese New Year and the Labour Day holidays. However, it remains unclear to what extent the overall business sentiment has recovered and how the border reopening between Hong Kong and the mainland has boosted confidence of enterprises in South China. Hence, in Q1 2023, JLL South China Research surveyed around 100 companies operating across different industries in Guangzhou and Shenzhen on their business outlook and real estate strategies for the year.
Figure 1: Economic Prospects for 2023
Source: JLL South China Research
In summary, 47% of the companies held a somewhat optimistic view of economic development in 2023. At least 32% responded in affirmative to staff expansion. Among their leasing strategies, in-house office expansion was the most common, followed by non-expansion, budget-saving relocation, and building upgrades. Glancing at the overall result, discrepancies or time lags existed in the general views on the economy, business growths, and ultimately, real estate strategies.
Figure 2: Economic Prospects for 2023 by Industry
Source: JLL South China Research
In summary, 47% of the companies held a somewhat optimistic view of economic development in 2023. At least 32% responded in affirmative to staff expansion. Among their leasing strategies, in-house office expansion was the most common, followed by non-expansion, budget-saving relocation, and building upgrades. Glancing at the overall result, discrepancies or time lags existed in the general views on the economy, business growths, and ultimately, real estate strategies.
Figure 3: Business Strategies and Leasing Strategies of Companies in Professional Services by Origin
Source: JLL South China Research
According to the survey, professional services were the most optimistic business sector, with 62% positive responses on the economic outlook. Despite all foreign professional services companies holding reserved judgements on 2023, and two-thirds of them plan structural optimisation initiatives, yet, 80% of the domestic privately-owned ones, after evaluating the prospect of relevant industries, keep a relatively optimistic stance on the future, while 63% of these have scheduled team and office space expansions simultaneously. All law firms in particular, except those heavily specialising in M&As or IPOs of tech firms, fell into this expansionary category.
Responses from the TMT sector displayed a much more conservative view of the future. The majority of respondents acknowledged that the consumer market recovery and the industry’s regulatory directions were among their top concerns. In addition, a negative correlation existed between the company size and its attitude ― the more employees it had, the less confident of the economy it became. Due to multiple uncertainties, only 38% of companies had a recruitment plan this year and little inclination to expand offices.
In conclusion, we expect that in the rest of 2023, tech giants might temporarily lack growth strength, unlike in previous years. Yet financial firms and SMEs in niche tech markets would remain the driving force behind the net absorption of office space in Guangzhou and Shenzhen. Moreover, Chinese professional services companies, especially those with a more diversified business scope, are also anticipated to make sizable contributions to the leasing market.
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