Briefing Office Sector August 2018
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Savills China Research Shenzhen Briefing Office sector August 2018 Image: KingKey 100, Shenzhen Luohu District SUMMARY The Shenzhen Grade A office market grew in line with the expanding tertiary industry in Q2/2018. Two new Grade A projects, Average rent edged up by 1% QoQ International Energy Mansion (国际能源 to RMB230.7 per sq m per month. “The Shenzhen Grade A office 大厦) and Kingdom Centre (京地大厦), were completed in Q2/2018. Both of The average sales price of strata- property market grew in line with them are located in Futian. titled assets rose by 1.1% QoQ to RMB57,682 per sq m. the local economy. Supported by New supply available for leasing the continued expansion of the totalled 135,000 sq m, pushing the total 11 projects with a total combined stock to 7.3 million sq m in Q2/2018. GFA of approximately 938,000 sq tertiary industry, asset performance Net take-up increased by 68.9% m are expected to be completed in remained positive, with both quarter-on-quarter (QoQ) to 272,000 sq Q3/2018. Of the total new supply, m this quarter. Futian, Nanshan, Luohu and Bao’an occupancy and rental rates pointing account for 40%, 40%, 13% and 7%, Carlby Xie, The average vacancy rate respectively. north by end-Q2/2018.” decreased by 2.1 percentage points Savills Research (ppts) QoQ to 9.7%. savills.com.cn/research 01 Briefing |Shenzhen office sector August 2018 Market summary GRAPH 1 According to the Shenzhen Statistic Grade A office supply, take-up and vacancy rates, Bureau, Shenzhen’s GDP expanded to RMB520.9 billion by the end of 1999-Q2/2018 Q1/2018, an increase of 8.1% year- New supply (LHS) Take-up (LHS) Vacancy rate (RHS) on-year (YoY). The growth rate was 1,400 60% 1.2 ppts higher than the national 54% rate. The tertiary industry increased 1,200 by 7.5% YoY to RMB301.4 billion. 48% In addition, city-wide Fixed Asset 1,000 42% Investment grew by 28.1% YoY. In 36% particular, investment in real estate 800 development grew by 31.1% YoY in 30% 600 Q1/2018. '000 sq m 24% Supply 400 18% Two new Grade A projects, 12% 200 International Energy Mansion (国际 6% 能源大厦) and Kingdom Centre (京地 0 0% 大厦), were completed in Q2/2018. Both of them are located in Futian. New supply available for leasing Source: Savills Research totalled 135,000 sq m, pushing the total stock to 7.3 million sq m. GRAPH 2 Demand Grade A office rental indices, 2001-Q2/2018 Overall, the Shenzhen office leasing market was active during Q2/2018, All Futian Luohu Nanshan Bao'an with the majority of demand coming 330 from the financial, professional services, high-tech and advanced 280 manufacturing sectors as well as co-working operators. The Futian and Nanshan office submarkets 230 recorded the most leasing transactions from the financial and 180 professional services sectors in Q1/2001 = 100 Q2/2018. In Futian for example, Great Wall Securities leased 15,000 130 sq m at International Energy Mansion South Tower, and China Merchants Financial Technology 80 leased 5,000 sq m on Upper Hill Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 T2. In Nanshan, DJI took up 30,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 18 sq m at Rongchao Houhai Tower. Source: Savills Research Co-working operators continued to expand in Shenzhen, as was the case of WeWork opening its new spill-over demand from the Futian Q2/2018, with continued growing space at Zhongjian Steel Structure submarket pushed the average investment sentiment, increased Plaza in Nanshan, occupying three rent in Luohu up by 2.3% QoQ to prices and some significant sales floors and approximately 4,500 sq RMB206.1 per sq m per month. In transactions. The average sales m. In addition, naked Hub opened spite of a moderate rental growth price of strata-titled assets rose by 4,000 sq m of co-work space in TCL from significant new completions in 1.1% QoQ to RMB57,682 per sq m Building. Nanshan, the average rent for the by the end of Q2/2018. Nanshan and submarket edged up by 0.2% QoQ Bao’an attracted a growing number Rents to RMB198.8 per sq m per month. of investors for their infrastructure The average rent increased by 1% Rents for Bao’an rose by 1.3% QoQ development within Qianhai/Houhai, QoQ to RMB230.7 per sq m per to RMB156.0 per sq m per month helped by the promotional efforts of month in Q2/2018. By submarket, due to demand for office space the local government. the average rent for Futian increased spilling over from the Qianhai Free by 1.2% QoQ to RMB266.1 per sq Trade Zone. The average sales price in Luohu m per month in this quarter and decreased by 3.2% QoQ to remained the highest among all Investment RMB38,625 per sq m as a result of the submarkets. The sophisticated Overall, the office property sales ageing facilities. In contrast to Futian business environment and the market remained positive during and Nanshan, favourable prices in 02 Briefing |Shenzhen office sector August 2018 the Luohu market should continue to Selected strata-title overall working population in the attract growing interest from many sales transaction tertiary industry in Shenzhen has investors. The Longhua government purchased grown by 6.8% YoY as of the end of 63,391 sq m of strata office space at 1H/2018, providing a strong demand Investment opportunities within Huide Mansion Phase II in Longgang base for office real estate. prime areas continued to attract district for RMB3.7 billion. However, the recent Sino-US trade a greater number of investors war is expected to have a negative and end-users due to the Market outlook impact on the local economy in more sophisticated business In the long run, prospects for the the short-term—particularly on the environments and infrastructure Shenzhen economy should remain pillar industries of Shenzhen, e.g. developments. This trend is positive as local GDP growth is the financial and high-tech sectors. expected to continue in the short forecast to reach 8% YoY by the end Office real estate occupiers from and medium term. of 2018, according to the Shenzhen these sectors should be more Statistics Bureau. In addition, the cautious when it comes to a review of their corporate real estate needs, which in turn could slow down GRAPH 2 their decision-making process and Grade A office price indices, 2001-Q2/2018 reduce office take-up in 2H/2018. A total of 11 projects with a All Futian Luohu Nanshan Bao'an combined GFA of approximately 450 938,000 sq m are expected to be 400 completed in Q3/2018. Of the total new supply, Futian, Nanshan, Luohu 350 and Bao’an account for 40%, 40%, 300 13% and 7%, respectively. In conjunction with the continued 250 infrastructure development 200 within the Greater Bay Area and Q1/2001 Q1/2001 = 100 the promotional efforts by the 150 central and local governments, 100 the real estate investment market in Shenzhen should continue to 50 attract growing interest from many 0 international investors. It is expected Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 that the real estate investment 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 18 inquiry volume will continue to grow Source: Savills Research during 2H/2018. Project Information International Energy Mansion 国际能源大厦 International Energy Mansion is owned Location Futian district by Shenzhen Energy Group Company Shenzhen Energy Group Company Limited. The project is located in Futian Owner Limited district and enjoys direct access to the Convention and Exhibition Centre Handover date Q2/2018 Station Metro on Lines 1 and 4. It Office GFA 90,420 sq m is close to the Huanggang Port and North Tower 41 floors, South Tower 19 No. of floors Futian Port. The standard floor plate floors of the building is 1,600-2,000 sq m. Typical floor plate 1,600-2,000 sq m At present, the average asking rent is Ceiling height 4.5 m RMB260 per sq m per month, with a property management fee of RMB32 Asking rent RMB260 per sq m per month per sq m per month. Management fee RMB32 per sq m per month Source: Savills China Research savills.com.cn/research 03 Briefing |Shenzhen office sector August 2018 Definitions Prime Areas: Futian, Luohu and Nanshan districts. Non-prime Areas: Bao’an. Rent: Achievable effective rents for a 500 sq m unit in the mid-zone of an office building signed for a three-year lease. Rental/price Index: A reflection of rental/price movement calculated upon a basket of projects.