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Monday, March 09, 2020, 22:08
Economic slowdown, oversupply expected to weigh on GBA market
By Zhou Mo
Monday, March 09, 2020, 22:08 By Zhou Mo

Slower economic growth and oversupply are expected to weigh heavily on the office market in the Guangdong-Hong Kong-Macao Greater Bay Area this year, especially Shenzhen and Guangzhou, adding more pressure to the industry as it struggles to cope with the impact of the coronavirus outbreak. 

The average rent index of Grade-A offices in the region dropped 2.5 percent to 166.6 in the second half of 2019, compared with the six-month period earlier, according to the latest report by real estate services provider Savills.

The decline in the price index was mainly due to economic uncertainty and oversupply. We expect the trend to continue in 2020

Ray Wu, 

deputy managing director of Savills Shenzhen

“The decline in the price index was mainly due to economic uncertainty and oversupply,” said Ray Wu, deputy managing director of Savills Shenzhen. “We expect the trend to continue in 2020.” 

The new supply of Grade-A offices in the 11-city cluster topped 1.4 million square meters in the second half of last year, bringing the total volume to 27.3 million square meters, the report said.

Shenzhen contributed to the largest share of the new supply, 75.4 percent, while Guangzhou and Dongguan accounted for 6.6 percent and 9.6 percent, respectively. 

“About 4.5 million square meters of new supply are expected to come into the market in Shenzhen within the coming five years, further aggravating the current situation of an oversupply. As a result, we could see vacancy rates of the city’s offices continuing to climb and rents under further downward pressure in 2020,” Wu said. 

Average monthly rents of Shenzhen’s Grade-A offices dropped 11.9 percent year-on-year to 202.6 yuan ($30) per square meter in 2019. 

Guangzhou, meanwhile, could see a relatively moderate adjustment, with vacancy rates keeping at a “reasonable” level and rents declining “slightly” this year, Wu said, without elaborating. The provincial capital of Guangdong saw average rents fall by 3.7 percent year-on-year to 177.4 yuan per square meter per month in 2019.

“We expect total transaction value of offices in Guangzhou and Shenzhen to stand at 18 billion yuan (HK$20.1 billion) this year.” 

While the coronavirus outbreak could deal a major blow to the property market in the Bay Area in the first half of 2020, Wu believes things will get better in the second half with sales rebounding after the epidemic and the government unveiling policies to support the industry.

sally@chinadailyhk.com 

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