Skip Ribbon Commands
Skip to main content

News Release


Rents stabilised in most of China’s Tier-1 cities, but 2Q13 saw slowing demand in office leasing activities across most of China’s leading and emerging cities

Jones Lang LaSalle releases Q2 2013 Greater China Office Index

• 2Q13 saw rental improvements in all Tier-1 cities, with South China’s Guangzhou and Shenzhen driving growth; up 1.3% and 2.8% q-o-q, respectively

• Some Tier-2 cities posted slight decline in rental growth rates; Chengdu pulled the Tier-2 Index down most in 2Q, while Shenyang continued to benefit from stretching vacancy levels

• In Hong Kong Central, rents registered a 1.5% q-o-q growth in 2Q13 after falling for seven consecutive quarters beginning in 3Q11

• Macau registered the strongest rental growth (up 10.5% in 1H13), and strongest capital values growth over the same period

• Domestic companies continued to be relatively more active in driving leasing demand than MNCs in 1H13

Grade A office rents across the Greater China region (includes Hong Kong and Macau) increased by an average of 0.7% q-o-q in 2Q13, a marginal improvement on the flat-growth witnessed in the first quarter, according to the latest Jones Lang LaSalle Greater China Office Index, as corporates remain cautious in their occupancy strategies.

The growth in 2Q13 was most noticeable in Tier-1 cities, either in the form of accelerating growth, flipping the negative sign in the case of Hong Kong, or reducing downward momentum in the case of Beijing. This is particularly the case in the Greater Pearl River Delta region, where rents began to rebound. In Guangzhou and Shenzhen, for instance, rents have gone up 2.0% and 3.5%, respectively since the beginning of this year. In Hong Kong Central, rents also registered a 1.5% q-o-q growth in 2Q13 after falling for seven consecutive quarters beginning in 3Q11.

Shanghai saw consistent growth of rents in 1H13, those in the CBD went up 1.2% in the year-to-date.  In contrast, Beijing, which had recorded the strongest rental growth across the Greater China region in the three years to end-2012, was the only Tier-1 city which saw rental declines in both quarters of 1H13.

Most Tier-2 cities posted positive rental growth in both 2Q13 and 1H13, except for Chengdu and Qingdao where vacancy rates were both at close to the 40% level. Dalian also saw rents edge down marginally in 2Q. As Chengdu has the largest Grade A office stock amongst the Tier-2 cities, it dragged the whole index down with its 3.8% decline in rents in 2Q13. Rents in Tier-2 cities  edged down 0.4% q-o-q in 2Q13.

Strong performers amongst the Tier-2 cities were Macau and Shenyang. Macau, the smallest Grade A office market monitored, registered the strongest rental growth (up 5.0% in 2Q13), due to strong and rising leasing demand from the construction and casino sectors. Shenyang continued to benefit from stretching vacancy levels in the prevailing market (at 3.6% as of mid-2013) and saw rents rise by 7.3% in 1H13.

Growth in the Greater China Grade A Office Capital Values Index accelerated from 0.4% q-o-q in 1Q13 to 1.0% q-o-q in 2Q13, bringing the half-yearly growth to 1.3%. Macau again outperformed other markets, seeing capital values rising further 19% in 1H13 after rising 65% in 2012.

Marcos Chan, Head of Research, North China, said: “Companies will likely remain relatively cautious towards expanding their business operations in this environment of fast but decelerating growth. The possibility of slower leasing momentum in 2H13 remains but we believe Grade A office rents in Tier-1 markets have stabilised. 2013 is shaping up to be one of the most active years on record for real estate investment in China. With large amounts of capital still looking to be put to work and signs of rents improving, investors’ confidence in core Chinese real estate markets is high. Investors will probably be a bit pickier in Tier-2 cities but we see little downside risk in capital values. We expect capital values across the Tier-1 cities to perform largely in line with rental performance in 2H13. ”