China Figures Q2 2023

OFFICE

The concentrated release of several deferred projects boosted new nationwide office market supply to 1.79 million sq. m. in Q2 2023, representing increases of 108% q-o-q and 186% y-o-y, respectively. The gradual recovery of demand combined with the low base effect ensured nationwide office net absorption grew by 119%  q-o-q and 188% y-o-y, registering just under 750,000 sq. m. Nationwide office vacancy rose by 0.5-pps to 23.7% as of quarter’s end, leading to a further 0.6% q-o-q decline in average rents.


RETAIL

The period witnessed the addition of 1.76 million sq. m. of new supply, marking an increase of 107% and 90% in sequential and y-o-y terms, respectively. The addition of a large volume of new stock pushed up nationwide net absorption to 1.17 million sq. m.. The vacancy rate stabilised at 9.3%. The strong performance of properties in prime locations led to a further narrowing of the decline in average rents to just 0.2% q-o-q.


LOGISTICS

Demand for investment-grade warehouse space continued to recover, achieving 1.3 billion sq. m., an increase of 27% y-o-y. This brought the H1 2023 total to 2.7 billion sq. m., 93% of the peak achieved in H1 2021. New supply grew significantly over the quarter, 70% of which was in tier I metropolitan areas. The ongoing supply peak ensured vacancy increased to 21%, a rise of 0.8-pps q-o-q.


INVESTMENT

Weaker-than-expected economic growth; subdued leasing fundamentals; prolonged overseas interest rate hikes; and ongoing geopolitical tension weighed on commercial real estate investment activity in Q2 2023, pulling down total investment volume by both 40% q-o-q and y-o-y to RMB 33.6 billion, the lowest quarterly total since 2019. Cross-border investment volume accounted for just 4% of the overall total. Half-year transaction volume reached RMB 88.9 billion, a decline of 17% y-o-y.