Skip Ribbon Commands
Skip to main content

News Release


Shenzhen Commercial Real Estate Leasing Improves as Market Continues to Pick Up

According to Jones Lang LaSalle First Quarter Property Review

Due to the economic upturn, the overall vacancy rate of the Shenzhen Grade A office market fell in 1Q10, while rentals rose steadily. In terms of supply, the newly completed Block 4 of the Excellence Century Centre has enabled the total Grade A office space to reach 1.94 million sqm. On the investment side, the prime office buildings in the Futian CBD and Chegongmiao have been coveted by local investors. The total volume in the retail market remained unchanged (1.41 million sqm) as there was no new supply in this quarter. In addition, retailers’ expansion plans have resulted in a continuous drop in the vacancy rate of existing retail shops. Driven by the increasing demand and the declining vacancy rate, office rentals witnessed a steady rise in 1Q10.

Grade A Office

The continuing economic recovery has boosted the Shenzhen Grade A office leasing market. The completion of Block 4 of Excellence Century Centre has raised the total Grade A office stock to 1.94 million sqm. This resulted in a quick revival in the leasing market with a net absorption of about 60,000 sqm, leading to a decrease in overall vacancy rate and a steady increase in office rentals at RMB 115.2 per sqm, up 1.0% q-o-q. Two major industries – the banking industry and the securities industry – continued to dominate the Grade A office leasing market in the first quarter. Aside from the financial industry, the growing demand from tenants in the special service and the high-tech sectors has also beefed up the market as a whole. The rebound in key office market indicators since 3Q09 and the glut of options in the 2010 supply pipeline are expected to prod tenants to re-examine their current situation, pointing to a potential growing demand for the Grade A office market.

Meanwhile, the investment market remained active in 1Q10, with projects in the Futian CBD and Chegongmiao being favored by local investors. During the quarter, one notable transaction recorded was Kaisa Group's acquisition of 44% of shares in the development site Fenglong Centre, which is located in the Futian CBD, for RMB 350 million.

The growing demand helped offset the pressure on office rentals from the growing supply. Due to the strong market demand, not even the entry of the Block 4 of Excellent Century Centre at the Futian CBD could stop the vacancy rate from declining and office rentals rising steadily. However, the fact that most of the new Grade A office completions are located in the Futian CBD means that the overall vacancy rate in this district will likely continue to rise in the coming year.

For the Shenzhen office market, all new Grade A office completions in the Futian District will approach about 400,000 sqm. And with the economic upturn, other industries aside from the financial sector will have a rapidly growing demand for Grade A offices. As new supply will be released in 2010, the overall vacancy rate in the Futian District will continue to rise, thus, resulting in a steady increase in rentals. “The year 2010 will witness a massive increase in Grade A office supply. These will include New Excellence Century Centre, which is expected to pump more buildings into the market; and East Pacific International Center, which has already started leasing activities. Hence, the overall vacancy level in the Futian District is expected to shoot up. Moreover, the facilities of these new establishments have been significantly improved, which means that their rental prices are likely to soar,” said Edward Xia, Head of Markets at Jones Lang LaSalle Shenzhen.


As the economy takes a turn for the better, retailers will have a growing demand for retail space. Despite the off-season influence (the first quarter is traditionally a slack season), the overall vacancy rate of the Shenzhen retail market still decreased in the first quarter, which resulted in rising rentals. As there were no new completions in 1Q10, the total space of shopping centers and commercial buildings in Shenzhen remained at around 1.4 million sqm. In addition, the quarter also recorded a moderate rise in the rental price of retail shopping centers, up 3.4% q-o-q.

In 1Q10, fashion and home appliance retailers have been quite active in the Shenzhen retail market. The F&B and entertainment segments still dominated the Luohu business district. The Futian CBD is gradually growing to maturity, with more new completions and higher occupancy rates, bringing a large number of medium-end and high-end consumer base. Fashion and F&B retailers will open stores in Shenzhen and consequently enhance the occupancy rate of the retail real estate market in this district. In Nanshan District, with the emergence of a large number of medium-end and high-end consumers and the completion of several large delicately designed shopping centers, many retailers have started to consider opening stores in this district, thereby resulting in a rise in occupancy rate.

The total estimated amount of high-quality retail space for 2010 is 150,000 sqm. Among which, KK-Mall is the most eye-catching as it is one of the few large-scale completions in Luohu in recent years. The mall's high-quality facilities and excellent geographical location have attracted many retailers. Thus far, the project's pre-leasing activity has been satisfactory. In 1Q10, some new brands, including UA Cinemas and Golden Jaguar from Taiwan, have entered the development.

According to Simon Lam, Head of Retail at Jones Lang LaSalle Guangzhou and Shenzhen, the vacancy rate of prime retail space in Shenzhen will remain low across all commercial circles due to the relatively small number of new completions. With better management and a better retail environment, the performance of shopping centers will also improve, and the low vacancy rate will then give rise to the steady growth of office rentals.