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Office developers in China are facing record-high vacancy levels in top-tier cities and are resorting to rent reductions and added incentives to attract tenants. Cities like Shenzhen and Shanghai have some of the highest vacancy rates, with landlords offering concessions such as cheaper utilities and subsidies for electric vehicle charging. Market analysts say weak corporate demand, cost-cutting, and multinationals scaling back have pushed leasing activity down. Developers are also relying on flexible lease options, but a prolonged market correction is still expected given oversupply and slowing economic momentum.
China's commercial property developers are under mounting pressure as vacancy rates in leading cities climb to record levels, prompting them to cut rents and offer extra services to retain tenants. Alongside rental discounts, incentives such as subsidies for electric vehicle charging and lower electricity costs are being used to keep offices occupied. Advertisement
Real estate consultancy Savills reported that by the end of June, Shenzhen had the highest vacancy rate at 30.6%, followed by 23.7% in Shanghai, 22.6% in Guangzhou and 19.6% in Beijing. These figures highlight the depth of the issue, even though remote working is far less common in China compared to Western countries.
Savills Research Senior Director James MacDonald said conditions were likely to stay difficult in the near term, with landlords depending on flexible leases and incentives to manage supply and weaker demand. Data also showed that rents for grade-A offices in the four major cities have fallen by 20% to 40% since 2020, with Beijing seeing the steepest decline.
China Merchants Commercial REIT, which saw a 16% fall in net property income in the first half of the year, recently noted that the commercial real estate sector's situation was more severe than the broader economy. The company highlighted that oversupply and weak demand were structural challenges. Executives said the market had grown rapidly for over three decades, but now required further correction, as policies alone would not quickly stabilise conditions.
Developers such as Hang Lung Properties have acknowledged similar challenges. The company reported a 5% drop in China office rental revenue in the first half, with its Shanghai properties under the greatest pressure due to high supply and falling rents. Chief Executive Weber Lo remarked that retaining tenants now meant offering lower rents, particularly as few multinational companies were expanding in China and many were actively seeking cheaper alternatives.
Beyond offices, other segments like logistics warehouses are also struggling. Shenzhen International, which counts JD.com and Walmart among its clients, has been working to maintain tenant relationships. The company's chairman stated that its leadership has been directly engaging with clients regularly to strengthen ties and avoid further exits.
Some local authorities have introduced support measures, including rental subsidies, suspending new land sales for commercial use, and encouraging conversion of older offices into housing. However, analysts believe the most meaningful support will come from wider economic growth rather than direct office market intervention.
Source- Reuters
5th Jun, 2025
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