China MarketView Q3 2021

Record high leasing demand heralds start of new growth cycle

OFFICE

New nationwide office supply reached 1.47 million sq. m. in Q3 2021. Overall net absorption totalled 2.03 million sq. m., a figure on par with the previous quarter. Demand from tier I cities contributed 73% of the total. This quarter’s robust demand further pushed down the overall vacancy rate by 0.8 ppts q-o-q to 21.4%. Average office rents declined for the fifth consecutive quarter, falling 0.02% q-o-q.

RETAIL

Around 3.17 million sq. m. of new retail supply came on stream nationwide in Q3 2021. Average occupancy in new supply stood at 92%. Strong pre-commitments in new supply pushed up nationwide net absorption to 3 million sq. m., the highest level since 2019. Overall vacancy decreased 0.2 ppts to 7.6% while rents edged up by 0.3% q-o-q.

LOGISTICS

Logistics net absorption in the 16 cities tracked by CBRE reached a record-high 2.09 million sq. m., an increase of 60% q-o-q and 67% y-o-y. Short-term demand from 3PLs strengthened ahead of the Double 11 shopping festival, while long-term demand from manufacturers increased as China's exports continued to outperform. The overall vacancy rate fell from 14.1% in Q2 2021 to 13.2% in Q3 2021, its lowest point since the beginning of 2020.

INVESTMENT

Commercial real estate transaction volume reached RMB 46 billion in Q3 2021, a decline of 53.4% q-o-q but a slight increase of 3.6% y-o-y. Transaction volume was level with that recorded in Q3 2019 and 3.5% higher than the five-year average for the third quarter.