China Figures Q1 2023

Office

The Chinese New Year holidays and lingering impact of anti-pandemic policies pulled down nationwide office supply by 40% q-o-q and 40% y-o-y to 860,000 sq. m. in Q1 2023. Although enquiries and site inspections picked up slightly, occupiers adopted a relatively prudent attitude towards decision making. Overall net absorption declined by 32% q-o-q and 66% y-o-y to 340,000 sq. m. Weaker demand resulted in a 0.3 pps q-o-q rise in nationwide office average vacancy but a narrower rental decline of 0.4% q-o-q.

Retail

930,000 sq. m of new supply was added in Q1 2023, the highest first quarter total in the past five years. Net absorption totalled just 330,000 sq. m., a decrease of 74% q-o-q and 32% y-o-y. Overall vacancy rose by 0.3 pps to 9.2%. Average ground floor shopping mall rents in cities with low vacancy stabilised over the quarter, leading to a slower decline in national average rents, which fell -0.2% y-o-y.

Logistics

The strong economic recovery pushed up nationwide logistics net absorption to 1.4 million sq. m. in Q1 2023, representing gains of 4.1% q-o-q and 57.4% y-o-y. The manufacturing industry and 3PLs were the largest sources of new leases this quarter, accounting for 29% of total volume. New logistics supply totalled 3.22 million sq. m., up 13% q-o-q and 114% y-o-y. Rents fell 0.4% q-o-q in Q1 2023 amid abundant new supply.

Investment

The shift away from zero-covid and gradual economic recovery helped commercial real estate investment grow by 6% y-o-y to RMB 54.7 billion in Q1 2023. The recovery was mainly driven by deals for self-use, with investment-oriented transactions registering just RMB 39.1 billion, down by 9.7% y-o-y.