HONG KONG — Chinese commercial property developers are seeking to entice tenants with value-added services, such as subsidies for charging electric vehicles in addition to lower rents, as they battle record-high vacancy rates across the country.
Empty offices are increasingly common even in top cities such as the southern tech hub of Shenzhen and commercial capital Shanghai, as the sector grapples with sluggish demand due to corporate cost-cutting and multinational companies shrinking their presence.
Shenzhen reported the highest vacancy rate of 30.6 percent among the country’s four first-tier cities at end-June, according to real estate consultancy Savills, followed by 23.7 percent in Shanghai, 22.6 percent in Guangzhou and 19.6 percent in Beijing, even though working from home is far less common than in many Western markets.
“We expect conditions to remain challenging in the near term, with landlords relying on incentives and flexible lease structures to retain tenants,” said Savills Research Senior Director James MacDonald, citing continued new supply and softer occupier demand in those cities.
Rents for grade-A offices in the four cities have dropped around 20 percent to 40 percent since 2020, with those in Beijing declining the most, according to Savills data.
State-owned China Merchants Commercial REIT, which reported a 16 percent drop in net property income in the first half, said in an earnings webcast in late August that it was providing tenants with more flexible leases and operational services in order to raise their “stickiness”.
“These services are as refined as air-con, electric appliances, including electricity fees for charging EV cars,” said Liu Zhongliu, who oversees management of some of the company’s property assets.
To support the office market, some local authorities have introduced measures including rental subsidies, encouraging older office buildings to be repurposed into residential housing and halted new land sales for commercial development.
Savills’ MacDonald said the most effective role for government would be to support the broader economy rather than attempt to directly stimulate the office market.
In the face of fierce competition, developers are offering rental concessions to keep leasing rates up.
Hong Kong developer Hang Lung Properties , whose China office rental revenue dropped 5 percent in the first half from a year ago, said its assets in Shanghai faced the worst pressure because there was ample supply and rents had dropped.
Outside the office sector, state-owned logistics warehouse developer Shenzhen International , which counts Chinese e-commerce giant JD.Com and US retailer Walmart as clients, is facing a similar issue.
“Our CEO Liu Zhengyu has been working very hard and visiting tenants every other week to maintain a good relationship and retain them,” Chairman Li Haitao told an earnings conference last month.
