China Figures Q1 2022

Pandemic resurgence weighs on leasing demand; Industrial investment reaches record high

Office

Nationwide new office supply totalled 1.42 million sq. m. in Q1 2022, representing a decline of 42% q-o-q but an increase of 33% y-o-y. A resurgence in COVID-19 infections and TMT consolidation weighed on nationwide net absorption, which fell to 1.05 million sq. m., representing a decline of 42% q-o-q and 32% y-o-y, but stay above 31% by compared with the average volume of Q1 in past three years. Overall office vacancy increased by 0.1 pps q-o-q to 21.6%, a figure 1.4 pp below the same period of 2021. Rents showed signs of stabilising.

Retail

Around 550,000 sq. m. of new retail supply came on stream in Q1 2022, a decrease of 83.8% q-o-q. Nationwide retail net absorption fell by 85% q-o-q to 480,000 sq. m., although this still marked a 14% y-o-y increase. Overall vacancy stood at 7.4% in Q1 2022, the same as the previous quarter, which was the lowest level since the onset of the pandemic in early 2020. Nationwide ground floor shopping mall rents increased by 0.1% q-o-q and 1.3% q-o-q.

Logistics

Net absorption amounted to 760,000 sq. m., marking a decline of 70% q-o-q and 41% y-o-y. Demand weakened under the influence of several short-term factors including a seasonal pullback after the Double 11 shopping festival and a surge in COVID-19 infections in multiple cities. Rents increased as overall rents in East China and South China rose by 1.9% q-o-q and 1.5% q-o-q, respectively.

Investment

Commercial real estate investment volume totalled RMB 50.1 billion in Q1 2022, representing a fall of 33% q-o-q and 7.8% y-o-y. Industrial and logistics remained the most sought-after asset class, with transaction volume rising to RMB 9.6 billion, a record-high.