“While it’s encouraging to see a more proactive government stance, its impact on the market will take time to materialise, and the full extent remains uncertain, meaning any market recovery is likely to be gradual.”

JAMES MACDONALD, SAVILLS RESEARCH



Sluggish Demand

• Three new projects were delivered in Q4/2024, contributing 301,000 sqm to the office market, increasing the total stock to 19.7 million sqm by year-end.

• As a result of the influx of new supply, the citywide vacancy rate rose by 0.9 ppts QoQ to 22.7%, up 2.0 ppts YoY.

• Net absorption totalled 62,000 sqm in Q4/2024, bringing the full-year net take-up to 700,000 sqm, an 8.2% increase. However, this remains only half of the net take-up recorded in 2021.

• Grade A office rents fell by 3.3% in Q4/2024, averaging RMB 5.9 psm per day. Prime, non-prime, and decentralised market rents fell by 1.6%, 4.3%, and 3.3%, respectively.

• Relocations of tenants have increased 15%-20% YoY in recorded leases, signalling a notable uptick in market activity. Tenants are seizing current opportunities, indicating a shift in market expectations. This decisive action could drive further movement, setting the stage for a more sustainable recovery and growth.

• The financial and retail sectors remain the dominant sources of demand, with notable lease deals from companies such as Pinduoduo, Lycra Fiber, and Lujiazui Int’l Trust, who have secured entire floors or more.

• China’s financial sector saw a 32% workforce decline from 2018 to 2023, the first in recent years, reflecting broader economic uncertainty. This has led to more cautious leasing and operational strategies, resulting in weaker demand from this traditionally strong market segment.