Office vacancies in China’s biggest cities are at the highest in more than a decade, even as the nation’s economy has largely swung back into action after the COVID-19 outbreak.
Vacancy rates for prime office buildings in Shanghai climbed to 20 percent in the second quarter and 21 percent in the tech hub of Shenzhen, both the highest since at least the financial crisis in 2008, CBRE Group Inc data showed.
Beijing’s 15.5 percent rate was the most since 2009.
China was the first country in the world to go into lockdown in the first quarter to arrest the spread of COVID-19. Harsh measures taken early on have allowed the nation to claim relative success and reopen many businesses, but a conservative stimulus approach, teamed with fear of a second wave, has produced only a modest domestic recovery, making corporate tenants cautious.
“Tenants have generally become more conservative and the majority are choosing to put their expansion or relocation plans on hold,” said Michael Wu (吳群), an executive director of office services at Colliers International Group Inc. “We’re starting to see fierce competition on rent among landlords.”
Adding to the pressure on landlords was a government directive in May that state-owned firms grant three-month rent-free periods for some smaller companies. Private landlords were encouraged to do the same.
While such measures averted a large-scale surrendering of offices, more tenants are still giving up their space before the lease expires, said Cindy Cai, who oversees office leasing in Shanghai’s state-owned business zone, Caohejing Hi-Tech Park (漕河涇開發區).
There is also the issue of a supply glut in many big cities. Of 14 major hubs tracked by Jones Lang LaSalle Inc (JLL), rents slid for all in the three months ended June 30, a second consecutive quarter of declines for most.
Total office stock in Shenzhen is expected to surge by about 60 percent by 2023 from the end of last year, and jump 44 percent in Shanghai, JLL said.
That excess space would push rents in Shenzhen and Shanghai down by almost 12 percent and 9.5 percent respectively this year, Colliers said.
Although a Bloomberg survey of economists said that China’s economy might expand 2 percent this year after a first-quarter slump, full-year growth would still be the lowest since the 1970s.
Uncertain demand would probably push vacancy rates in key centers even higher.
In Shanghai, office-vacancy rates could soar to 30 percent next year before finally coming down, Colliers said, adding that almost one-third of all prime offices in Shenzen are expected to be empty by 2022.
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Huawei Technologies Co’s (華為) latest smartphones carry a version of the advanced made-in-China processor it revealed last year, results from an independent analysis showed. This underscored the Chinese company’s ability to sustain production of the controversial chip. The Pura 70 series unveiled last week sports the Kirin 9010 processor, research firm TechInsights found during a teardown of the device. This is a newer version of the Kirin 9000s, made by Semiconductor Manufacturing International Corp (SMIC, 中芯) for the Mate 60 Pro, which had alarmed officials in Washington who thought a 7-nanometer chip was beyond China’s capabilities. Huawei has enjoyed a resurgence since
purpose: Tesla’s CEO sought to meet senior Chinese officials to discuss the rollout of its ‘full self-driving’ software in China and approval to transfer data they had collected Tesla Inc CEO Elon Musk arrived in Beijing yesterday on an unannounced visit, where he is expected to meet senior officials to discuss the rollout of "full self-driving" (FSD) software and permission to transfer data overseas, according to a person with knowledge of the matter. Chinese state media reported that he met Premier Li Qiang (李強) in Beijing, during which Li told Musk that Tesla's development in China could be regarded as a successful example of US-China economic and trade cooperation. Musk confirmed his meeting with the premier yesterday with a post on social media platform X. "Honored to meet with Premier Li