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<CN Property>CN Office Demands See No Recovery After Zero-Covid; Vacancies of Grade A Offices Rise in BJ/SH/GZ/SZ
Nikkei Asia, citing a Savills report, highlighted that the vacancy rate of office space in the Mainland is now higher than it was during the strict Covid lockdowns, adding to the a...
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<CN Property>CN Office Demands See No Recovery After Zero-Covid; Vacancies of Grade A Offices Rise in BJ/SH/GZ/SZ
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Nikkei Asia, citing a Savills report, highlighted that the vacancy rate of office space in the Mainland is now higher than it was during the strict Covid lockdowns, adding to the already struggling real estate market in the country.

According to the report, the vacancy rate of Grade A offices in the four major first-tier cities, namely Beijing, Shanghai, Guangzhou and Shenzhen, increased YoY in 2Q. Shenzhen's vacancy rate rose 4.1 ppts to 27%, the worst among the four cities. Guangzhou, once regarded as one of the strongest office rental markets, also saw its vacancy rate hike 5.9 ppts to a 10-year high of 20.8%.

Related NewsUBS Raises TENCENT (00700.HK) TP to $438; Overseas Game Recovery Overlooked
A rising vacancy rate means that rents are under pressure. Rent per square metre for Grade A offices in Beijing plummeted 7.4% YoY to RMB312.5 per square metre in 2Q, while rents in Guangzhou and Shenzhen also fell. The bank attributed the downward trend to uncertainty in the economic environment, which could hint at a larger structural problem.

In the past, China drastically reduced travel and other activities to curb the spread of Covid during the severe lockdown phase. Businesses have resorted to telework, downsizing and even office closures. China lifted its Covid-zero policy in January this year, but office vacancy rates are still rising due to the completion of more commercial buildings started before the outbreak and a slow recovery in demand.

In the past, high office vacancy rates may have led to conversions to residential or hotels, but in many cases such conversions were illegal as the land was not zoned for such uses.

Related NewsCICC's List of Technology Hardware Sector Holdings Through HK Stock Connect in 1Q (Table)
Consumer electronics maker NETAC TECH (300042.SZ)  +1.140 (+4.576%)   , which has a rental property business, announced in March that TENCNT (00700.HK)  +9.000 (+2.652%)    Short selling $1.88B; Ratio 18.261%   had decided to end the lease earlier on its property, which was due to expire in 2026. Tencent's workforce fell 6% YoY to 104,500 at the end of June, amid a headwind for mainland tech stocks, and the drop in staff also signalled a decline in office demand.
(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-04-26 16:25.) (A Shares quote is delayed for at least 15 mins.)

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