Office glut creeps up in Shenzhen, Beijing and Shanghai as trade war saps growth plans and start-ups move to co-working spaces

By Pearl Liu / | July 23, 2019 2:45 PM SGT
A building frenzy in southern China's answer to Silicon Valley has driven the vacancy in Grade A offices to a record high, putting the squeeze on part-time developers whose blind inexperience have led them into the industry.
A record 1.79 million square metres (19.27 million sq ft) of vacancy, equivalent to 10 of Hong Kong's IFC towers, stood in Shenzhen at the end of June, requiring about two years to fill up, according to the real estate consultancy CBRE. Half of that empty space lies in Nanshan district, home to such Chinese technology behemoths as Tencent, ZTE, and drone maker DJI.
Hubris and herd mentality added hot air to the bubble, as companies invested cash earned from elsewhere into property, in the belief that they too could profit from China's economic growth.
Only four of the 15 builders of Shenzhen's new office towers this year are major developers, while the majority are small builders, investment companies or conglomerates in manufacturing, health care, logistics and retailing.
"Some cash-rich companies from other industries have blindly joined the real estate sector, expecting to earn big bucks," said Yan Yuejin, a research director at Shanghai-based E-House China R&D Institute.
"These are the companies who will suffer the most when the market turns south, as they are not familiar with the products and rules of the real estate industry, and they cannot come up with solutions quickly enough."
Shenzhen's office vacancy has risen to record, as construction has outpaced demand. alt=Shenzhen's office vacancy has risen to record, as construction has outpaced demand.
Shenzhen's vacancy rate rose to a record 16.6 per cent in the second quarter, up from 15 per cent in the first three months, as take-up slowed with the deteriorating US-China trade war, as start-ups are increasingly ditching their space in staid office towers for hip co-working...