Office rents under pressure as vacancies rise

Further to my previous post on real estate, here an interesting update on market trends. There is a growing conflict between the rising rent and the survival of the service sector and offices. A number of restaurants use space that can be either for office or other purposes. Just check the subsequent locations of the well-known restaurant MARE. The previous location is now HSBC…
“Office rents under pressure as vacancies rise”
Source: FCCC Newsletter No 303, 11 February (FLANDERS-CHINA CHAMBER OF COMMERCE)
Office vacancy rates in China will continue to rise in 2013, with rents under pressure after skyrocketing over the past few years, international real estate service provider CBRE said.
Beijing’s rent growth of Grade A offices is expected to slow to about 5% in 2013, as elevated rent levels have decreased tenants’ affordability dramatically over the last three years, Savills said in a report. Grade A office rents in Beijing increased by 0.9% in the fourth quarter of 2012 to CNY317.8 per square meter per month, with annual growth falling to 13.8% from 44.2% in 2011, the report showed. “A number of landlords began to offer more rental incentives to combat slowing demand and retain existing tenants, given the current sluggish economy,” said Joan Wang, head of research at Savills Beijing. The demand for office space across China continued to decrease in 2012 due to a sluggish economy, with net absorption falling by more than 40% year-on-year, statistics from CBRE showed. Many multinational companies suspended their expansion plans in China in 2012, as well as a number of Chinese companies. The amount of new supply decreased by 30% year-on-year. Against a backdrop of significant decrease in demand, vacancy rates increased to 12.8% in 2012, marking the first rise of 1.1 percentage points year-on-year after three consecutive years of decline.

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