Lettable Office Area ( 000 sq m) Rent (RMB/sq m/mo) Vacancy Rate (%) Beijing BEIJING OFFICE Economic Indicators Grade A CBD Market Indicators Q3 16 Q4 16 GDP 6.7% 6.7% Tertiary Sector 7.3% 7.1% CPI 1.2% 1.4% Source: Beijing Statistics Bureau Average Effective Rent* (RMB/sq m/mo) Q4 16 Q1 17 409.5 410.5 Vacancy Rate 5.0% 5.5% Grade A CBD Rent & Vacancy Rate 420 400 380 360 340 320 300 280 260 240 220 200 Overall Rent Vacancy Rate (%) Past 12-Month 12-Month Forecast 8% 6% 4% 2% 0% Economy Beijing recorded GDP growth of 6.7% y-o-y in 2016, continuing a smooth run over the entire year. Real estate investment in fixed assets fell to 2.1% y-o-y growth in 2016, down from 8.1% in 2015. Market Overview The market welcomed a number of new office buildings, such as China World Trade Center Tower IIIB and Zhongguancun Capital Tower. The properties added a combined 156,000 sq m of Grade A office supply and raised stock to 9.46 million sq m. Beijing s Grade A office rents remained stable in Q1. The overall market recorded an effective rent of RMB388.4 per sq m per month, up 0.3% q-o-q. The average effective rent in the city s five core submarkets increased 0.2% q-o-q to RMB410.5 per sq m per month. New office supply in the five core submarkets brought about a 0.5 q-o-q percentage point rise in the vacancy rate to 5.5% at the end of Q1. Across the broader market, the vacancy rate held at 6.6%. Strong office demand helped drive down the vacancy rate in the Wangjing-Jiuxianqiao area, from 17.3% in Q4 to 11% in Q1. Gross effective rents in the submarket increased 0.3% q-o-q to average RMB281.8 per sq m per month in Q1. Zhongguancun drew the strongest demand among submarkets with net absorption amounting to 53,000 sq m for the quarter. New office supply was quickly absorbed and had minimal impact on market performance. The vacancy rate has stabilized at 2.6%. Supply Pipeline 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 10 year (2007 2016) Historical Average = 647,000 sq m 2017 2018 2019 2020 2021 Core Submarkets Emerging Submarkets Completion Outlook The 2016 VAT reform has added cost pressure for landlords, which in turn has been passed on to tenants in the form of higher rents. This was one main factor in driving up gross effective rents across the city despite massive future supply levels. The vacancy rate is expected to increase over the period, while gross effective rents should remain steady or gradually rise. Urban regeneration has became a hot topic in recent years. In Beijing, renovation of hotels and traditional retail projects for office use has been popular due to the prospect of lower operation costs and greater rental income. This trend is expected to continue throughout the year. cushmanwakefield.com
Beijing SUBMARKET INVENTORY VACANCY RATE NEW COMPLETIONS YEAR-TO-DATE UNDER CONSTRUCTION GRADE A EFFECTIVE RENT* RMB/SQ M/MO US$/SF/MO EUR/SF/MO CBD 3,083,926 8.1% 68,000 2,737,000 384.2 5.2 4.8 Financial Street 1,416,550 2.7% 34,017 624,388 660.7 8.9 8.3 Lufthansa 1,008,293 7.1% 0 48,957 353.1 4.8 4.4 East 2 nd Ring Road 1,130,655 3.0% 0 457,000 343.4 4.6 4.3 Zhongguancun 1,046,972 2.6% 54,000 600,000 351.6 4.7 4.4 BEIJING CBD Grade A Total 7,686,396 5.5% 156,017 4,467,345 410.5 5.5 5.1 WangJing-Jiuxianqiao 560,660 11.0% 0 424,208 281.8 3.8 3.5 Olympic Games Village (OGV) 557,039 15.0% 0 342,437 368.5 5.0 4.6 Beijing Development Area (BDA) 474,648 20.5% 0 0 162.0 2.2 2.0 Li ze Financial Business District - - 0 1,439,717 - - - Others* 179,353-0 602,529 - - - BEIJING Overall Grade A Total 9,458,096 6.6% 156,017 7,276,236 388.4 5.2 5.0 * Projects of others not belonging to any of the above submarkets. ** Effective Rent is calculated based on gross floor area and assuming a letting mid floors for a typical three-year lease term with rent-free periods factored in. *** Exchange Rate: 1 USD = 6.8923 CNY = 0.9275 EUR Key Leasing Transactions Q1 2017 PROPERTY SUBMARKET TENANT SQ M LEASE TYPE IKEA Tower WangJing-Jiuxianqiao Kapokcn 7,407 New Lease Huitong Office Park Others Allianz Group 6,243 Relocation Lei Shing Hong Center WangJing-Jiuxianqiao Omnicom 5,910 Relocation World Financial Center CBD Airbnb 3,558 New Lease INDIGO WangJing-Jiuxianqiao Kidsland 2,358 New Lease Bo Rui Tower CBD Zimmer 1,000 Relocation Cyber 01 Tower CBD Interone China 919 Renewal Significant Projects Under Construction PROPERTY SUBMARKET MAJOR TENANT SQ M COMPLETION DATE International Electronic Headquarter WangJing-Jiuxianqiao N/A 160,000 Q2 2017 CSCEC Tower OGV N/A 95,437 Q2 2017 Hademen Plaza Others (Chongwenmen) N/A 86,000 Q2 2017 CRCC Plaza Office Tower A Others N/A 36,412 Q2 2017 ZRT Tower Beijing Others N/A 39,487 Q2 2017 World Profit Center II Lufthansa N/A 48,957 Q3 2017 Hengyi Tower OGV N/A 72,000 Q3 2017 China Life Financial Center (Z13) CBD N/A 120,000(Total GFA) Q1 2018 Samsung Headquarters Tower (Z2b) CBD N/A 120,000(Total GFA) Q1 2018 Chia Tai Group (Z14) CBD N/A 220,000(Total GFA) Q1 2018 cushmanwakefield.com
Beijing Contact Sean Wang Vice President, Greater China, Managing Director, North China Tel: +86 10 8519 8168 sean.s.wang@cushwake.com Jonathan Wei Senior Director Head of Mainland China Occupier Services Tel: +86 21 2208 0119 jonathan.cy.wei@cushwake.com Charles Yan Senior Director Head of North China Occupier Services Tel: +86 10 8519 8194 charles.qh.yan@cushwake.com Aaron Li Director Head of North China Office Agency Tel: +86 10 8519 8225 aaron.sc.li@cushwake.com James Shepherd Managing Director Research, Greater China Tel: +86 21 2208 0769 james.shepherd@cushwake.com Sabrina Wei Senior Associate Director Head of North China Research Tel: +86 10 8519 8087 sabrina.d.wei@cushwake.com About Cushman & Wakefield Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop and live. The firm s 43,000 employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world. In Greater China, the firm has a co-branded presence under the name of Cushman & Wakefield and operates 20 offices in the region. Cushman & Wakefield is among the largest commercial real estate services firms with revenues of $5 billion across core services of agency leasing, asset services, capital markets, facility services, global occupier services, investment & asset management, project management, tenant representation and valuation & advisory. To learn more, please visit www.cushmanwakefield.com. Disclaimer This report has been produced by Cushman & Wakefield for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield shall not be liable to any reader of this report or any third party in any way whatsoever. Cushman & Wakefield shall not be held responsible for and shall be released and held harmless from any decision made together with any risks associated with such decision in reliance upon any expression of opinion in the report. Our prior written consent is required before this report can be reproduced in whole or in part. 2017 Cushman & Wakefield All rights reserved. cushmanwakefield.com
GFA ( 000 sq m) Face Rent (RMB/sq m/mo) Vacancy Rate (%) Guangzhou GUANGZHOU OFFICE Economic Indicators Q3 16 Q4 16 GDP 8.1% 8.2% Service Sector GDP 8.9% 9.4% CPI 2.6% 2.7% Source: Guangzhou Statistics Bureau Note: figure is y-o-y growth Guangzhou Grade A Office Market Indicators Average Face Rent* (RMB/sq m/mo) Q4 16 Q1 17 168.8 170.4 Vacancy Rate 14.3% 12.9% Guangzhou Grade A Office Rent & Vacancy Rate 174 172 170 168 166 164 162 160 Past 12-Month 12-Month Forecast 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Economy Guangzhou s economy expanded 8.2% y-o-y in 2016 compared to 8.4% in 2015. In Q4, the tertiary sector increased 9.4% y-o-y, while CPI accelerated 2.7% y-o-y. Market Overview Tianhe Sports Center added the 30,227-sq m Tian an Life Center in Q1, the first new building in the submarket since 2012. Guangzhou Grade A office stock increased to 4.7 million sq m. Influenced by the holiday, Guangzhou Q1 office market was relatively stable. The overall vacancy rate in Guangzhou fell 1.4 percentage points q-o-q to 12.9% in Q1. By submarket, the vacancy rate in Tianhe Sports Center jumped to 7.6% due to new supply, up from 3.6% in Q4. Zhujiang New Town remained popular and saw the vacancy rate tighten to 12.4%, down from 13.2% in Q4. Yuexiu s vacancy rate decreased 3.2 percentage points to 5.1% in Q1 thanks to strong performance at Lai Fung Center. The vacancy rate in Pazhou plunged 14.9 percentage points q-o-q to 31.0% in Q1 due to strong leasing performance. Net absorption amounted to 93,112 sq m in Q1, with nearly 70% of quarterly absorption achieved in Pazhou. Competitive rent helped to more than double Pazhou s absorption from the previous quarter to 65,100 sq m in Q1. Face Rent Vacancy Rate (%) CBD Supply Pipeline 120 10-year Historical Average = 420,097 sq m 100 80 60 40 20 0 2017 2018 2019 2020 2021 *Data only covers major business hubs in urban Guangzhou Rent for Grade A offices averaged RMB170.4 per sq m per month in Q1, up 1.0% q-o-q. Among submarkets, Pazhou led the way with 4.0% q-o-q average rent growth thanks to infrastructure improvements and decreasing vacancy. Yuexiu s average rent grew 2.7% q-o-q on falling vacancy. Average rent in Zhujiang New Town increased 0.7% q-o-q due to growing occupancy levels and tight supply. Average rent in Tianhe Sports Center remained at RMB171.7 per sq m per month. Outlook Ahead, Guangzhou is set to receive 238,554 sq m of new Grade A office supply over the next three quarters, with all new buildings in Pazhou. Leasing transactions should pick up in Q2, causing rent to edge up and vacancy levels to fall. cushmanwakefield.com
Guangzhou SUBMARKET INVENTORY VACANCY RATE NEW COMPLETIONS YEAR-TO-DATE UNDER CONSTRUCTION GRADE A FACE RENT RMB/SQ M/MO US$/SF/MO EUR/SF/MO Tianhe Sports Center 857,190 7.6% 30,227-171.68 2.3 2.1 Zhujiang New Town 3,150,141 12.4% - 337,604 180.88 2.4 2.3 Yuexiu 269,988 5.1% - 150,388 130.28 1.8 1.6 Pazhou 436,175 31.0% - 1,579,999 117.04 1.6 1.5 Others - - - 1,090,741 - - - Guangzhou Grade A Total 4,713,494 12.9% 30,227 3,158,732 170.4 2.3 2.1 * Rental equals Gross Transacted Face Rental 1 USD = 6.8923 RMB = 0.9275 EUR as at 23 rd Mar, 2017 Key Leasing Transactions Q1 2017 PROPERTY SUBMARKET TENANT SQ M LEASE TYPE Yuexiu Financial Tower Zhujiang New Town Guangdong Wangjin Holdings Co.Ltd 4000 Relocation Baoland Plaza Pazhou BMW 3000 Relocation CTF Finance Centre Zhujiang New Town Guangdong Baolihua New Energy Stock Co., Ltd 940 Relocation Zhongtai International Square Tianhe Sports Center irobot 840 Expansion Central Tower Zhujiang New Town The United Arab Emirates Consulate (Guangzhou) 740 Relocation CTF Finance Centre Zhujiang New Town Citibank 600 Relocation Significant Projects Under Construction PROPERTY SUBMARKET MAJOR TENANT SQ M COMPLETION DATE Guangzhou Hypermedia Center Pazhou - 67,918 2017 Bravo International Trade Pazhou - 123,136 2017 GF Securities Building Pearl River New City - 62,604 2018 Sancheng IFC Pearl River New City - 120,000 2018 Changjiang Center Financial Town - 142,600 2019 Note: All figures are approximate. Contacts Kelvin Li Managing Director, Central China General Manager, Guangzhou & Zhengzhou Tel: +86 20 8510 8138 kelvin.qw.li@cushwake.com Jonathan Wei Managing Director Head of Greater China Occupier Service Tel: +86 21 2208 0119 jonathan.cy.wei@cushwake.com Connie Qiu Senior Associate Director Head of Guangzhou Occupier Service Tel: +86 20 8510 8282 connie.xy.qiu@cushwake.com James Shepherd Managing Director Research, Greater China Tel: +86 21 2208 0769 james.shepherd@cushwake.com Gracie Miao Senior Analyst Research, Central China Tel: +86 20 8510 8191 gracie.sy.miao@cushwake.com
Guangzhou About Cushman & Wakefield Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop and live. The firm s 43,000 employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world. In Greater China, the firm has a co-branded presence under the name of Cushman & Wakefield and operates 20 offices in the region. Cushman & Wakefield is among the largest commercial real estate services firms with revenues of $5 billion across core services of agency leasing, asset services, capital markets, facility services, global occupier services, investment & asset management, project management, tenant representation and valuation & advisory. To learn more, please visit www.cushmanwakefield.com Disclaimer This report has been produced by Cushman & Wakefield for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield shall not be liable to any reader of this report or any third party in any way whatsoever. Cushman & Wakefield shall not be held responsible for and shall be released and held harmless from any decision made together with any risks associated with such decision in reliance upon any expression of opinion in the report. Our prior written consent is required before this report can be reproduced in whole or in part. 2017 Cushman & Wakefield All rights reserved.
Lettable Office Area ( 000 sq m) Rent (RMB/sq m/mo) Vacancy Rate (%) Shanghai SHANGHAI OFFICE Economic Indicators Grade A CBD Market Indicators Q3 16 Q4 16 GDP 6.7% 6.8% Service Sector GDP 10.3% 9.5% CPI 3.2% 3.2% Source: Shanghai Statistics Bureau Note: figure is y-o-y growth Average Face Rent* (RMB/sq m/mo) Q4 16 Q1 17 316.5 317.2 Vacancy Rate 10.5% 10.4% Past 12-Month 12-Month Forecast Economy Shanghai s economy expanded 6.8% y-o-y in 2016, down from 6.9% y-o-y in 2015. Service Sector GDP slid back to 9.5% y-o-y growth in Q4, while CPI remained stable at 3.2%. Market Overview ITC Phase I, SOHO Tianshan Plaza were completed in Q1. Shanghai added a total of 117,534 sq m of new Grade A office supply for the quarter, raising central CBD stock to approximately 6.35 million sq m. Robust demand for office space in Shanghai s central CBD helped drive down the vacancy rate to 10.4%, down 0.1 percentage points q-o-q. Core Jing an recorded the lowest availability ratio among CBD submarkets at 6.8%. Leasing demand cooled in Q1, with net absorption amounting to 131,976 sq m compared to 301,751 sq m the previous quarter. But the picture is more positive when looked at on an annual basis, as quarterly net absorption one year ago amounted to 65,109 sq m, or about 50% of Q1 2017 s figure. Grade A CBD Rent & Vacancy Rate 340 320 300 280 260 240 Overall Rent Vacancy Rate (%) CBD Supply Pipeline 1,000 10-year Historical Average = 0.47 million sq m 800 600 400 200 12% 10% 8% 6% 4% 2% 0% Due to a basket adjustment for the Core Xuhui submarket*, average rents for Grade A central CBD offices increased 0.2% q- o-q to RMB317.2 per sq m per month in Q1. On the whole, rents were on a downward trend across most Grade A central CBD office submarkets because of a slower economic environment and growing landlord competition in suburban markets. Delivery of a large amount of new supply over the course of 2017 should keep competition fierce. In Q2, Shanghai is set to receive 300,000 sq m of new office supply in the central CBD area, which will add further short-term pressure on vacancies in some districts. Emerging areas, such as the Hongqiao Hub, will continue to add new supply this year. Already, the market added more than 400,00 sq m of new office supply in suburban markets in Q1, providing more options for occupiers. Capital values for Grade A central CBD office buildings increased to an average of RMB82,381 per sq m in Q1, up 0.7% from the previous quarter. Chinese domestic buyers continued to dominate the en-bloc office invest market in Shanghai. Market yields remained stable at 4.6% at the end of Q1. Outlook Looking ahead, Shanghai s office rentals should continue to adjust between -1.5% and 0% in Q2. With new completions coming online, the vacancy rate is expected to increase marginally by 1 3 percentage points. Given low market yields, investment sentiment is expected to stabilize within the year while yields should remain low. 0 2017 2018 2019 2020 2021 *Note: Xuhui submarket has been divided into Core Xuhui & Fringe Xuhui submarkets from Q1 2017. www.cushmanwakefield.com
Shanghai SUBMARKET INVENTORY VACANCY RATE NEW COMPLETIONS YEAR-TO-DATE UNDER CONSTRUCTION GRADE A FACE RENT RMB/SQ M/MO US$/SF/MO EUR/SF/MO Core Jing an 958,520 6.8% - 302,352 341.5 US$4.60 4.27 New Huangpu 1,456,434 13.8% - 745,125 303.9 US$4.10 3.80 Lujiazui 1,758,402 8.8% - 478,527 394.6 US$5.32 4.94 Zhuyuan 759,747 7.0% 28,900 154,836 291.8 US$3.93 3.65 Changning 906,435 15.6% 72,000 255,029 228.5 US$3.08 2.86 *Core Xuhui 508,278 7.7% 16,634 361,066 326.8 US$4.41 4.09 SHANGHAI CBD Grade A Total 6,347,816 10.4% 117,534 2,196,035 317.2 US$4.28 3.97 Shanghai Suburban Grade A 2,881,912 21.6% 444,603 5,022,659 201.5 US$2.72 2.52 * Rental equals Gross Transacted Face Rental 1 USD = 6.8923 RMB = 0.9275 EUR * Note: Xuhui submarket has been divided into Core Xuhui & Fringe Xuhui submarkets from Q1 2017. Key Leasing Transactions Q1 2017 PROPERTY SUBMARKET TENANT SQ M LEASE TYPE Kerry Center Core Jing an Sanofi 12,000 Renewal BFC New Huangpu NT Pharma 3,500 Relocation ITC I Core Xuhui Marriott 3,000 Relocation Sinar Mas Center Hongkou East & Concord Partners 1,900 Relocation Qiantan WTC Qiantan Shimizu Corporation 1,600 Relocation Significant Projects Under Construction PROPERTY SUBMARKET MAJOR TENANT SQ M COMPLETION DATE HKRI Taikoo Hui T2 Core Jing an - 71,400 2017 Sinar Mas Centre Hongkou - 136,798 2017 China Life Financial Centre Lujiazui - 88,000 2017 Qiantan World Trade Centre II Qiantian - 71,600 2017 One Museum Place Core Jing an - 132,000 2018 CapitaMall LuOne New Huangpu - 44,125 2018 Qiantan Crystal Plaza Qiantian - 200,000 2018 Qiantan Centre Qiantian - 168,000 2019 Park Avenue Central Core Jing an - 98,952 2020 Henderson Centre Fringe Xuhui - 169,943 2021
Shanghai Contact Mimie Lau Managing Director, East China Tel: +86 2208 0100 mimie.sw.lau@cushwake.com Jonathan Wei Head of Mainland China Occupier Services Tel: +86 21 2208 0119 jonathan.cy.wei@cushwake.com Vicky Shen Head of Office Services Tel: +86 21 2208 0189 vicky.j.shen@cushwake.com James Shepherd Managing Director, Research, Greater China Tel: +86 21 2208 0769 james.shepherd@cushwake.com Shaun Brodie Head of Occupier Research, Greater China Tel: +86 21 2208 0529 shaun.fv.brodie@cushwake.com About Cushman & Wakefield Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop and live. The firm s 43,000 employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world. In Greater China, the firm has a co-branded presence under the name of Cushman & Wakefield and operates 20 offices in the region. Cushman & Wakefield is among the largest commercial real estate services firms with revenues of $5 billion across core services of agency leasing, asset services, capital markets, facility services, global occupier services, investment & asset management, project management, tenant representation and valuation & advisory. To learn more, please visit www.cushmanwakefield.com Disclaimer This report has been produced by Cushman & Wakefield for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield shall not be liable to any reader of this report or any third party in any way whatsoever. Cushman & Wakefield shall not be held responsible for and shall be released and held harmless from any decision made together with any risks associated with such decision in reliance upon any expression of opinion in the report. Our prior written consent is required before this report can be reproduced in whole or in part. 2017 Cushman & Wakefield All rights reserved.
Lettable Office Area ( 000 sq m) Rent (RMB/sq m/mo) Vacancy Rate (%) Shenzhen SHENZHEN OFFICE Economic Indicators Grade A CBD Market Indicators Grade A CBD Rent & Vacancy Rate Q3 16 Q4 16 GDP 8.7% 9.0% Service Sector GDP 10.5% 10.4% CPI 2.4% 2.4% Source: Shenzhen Statistics Bureau Note: figure is y-o-y growth Average Face Rent* (RMB/sq m/mo) Q4 16 Q1 17 247.7 267.2 Vacancy Rate 13.3% 14.5% 300 250 200 150 100 50 0 Rent Vacancy Rate Past 12-Month 12-Month Forecast 16% 14% 12% 10% 8% 6% 4% 2% 0% Economy Shenzhen s economy expanded 9% to RMB1.95 trillion in 2016, outpacing all other Tier-1 cities. In Q4, the service sector advanced 10.4% to RMB1.18 trillion. The finance industry raced ahead 14.6% to RMB287.69 billion in Q4, while other service sectors increased 17.2% to RMB396.95 million. Market Overview Shenzhen added 518,720 sq m of new office supply in Q1, pushing up Grade A stock to 3,956,133 sq m. Completions included the Ping An International Financial Center and three other new buildings in Nanshan District. Citywide absorption amounted to 400,737.67 sq m in Q1, yet the overall vacancy rate grew 1.2 percentage points to 14.5% in Q1 on new supply. Grade A office rent increased 7.9% q-o-q to average RMB267.22 per sq m per month on strong performance in Futian District. In Futian, Ping An International Financial Center achieved excellent leasing performance owing to its prestige and high-end quality. Net absorption for the submarket amounted to 304,000 sq m in Q1, and the vacancy rate fell 0.6 percentage points q-o-q. Rent hit a record RMB305.97 per sq m per month on average, up 12.2% q-o-q on new quality supply and high demand for office premises. Nanshan recorded net absorption of 102,000 sq m in Q1, yet the vacancy rate increased 4.1 percentage points in the submarket due to the new completions. Average rent edged up 0.03% q-o-q thanks to a maturing business environment. Elsewhere, lack of new Grade A supply in Luohu District, coupled with competition in Futian and Nanshan, has prompted relocations from the submarket. Luohu s vacancy rate increased 1.0 percentage points in Q1, while average rent fell 0.5% q-o-q. CBD Supply Pipeline 2,500 10-year Historical Average = 0.24 million sq m 2,000 Leasing activity picked up in Q1 on a bright economic outlook. Demand remained strongest among financial and technology companies, with real estate companies an emerging growth segment. Foreign companies have slowed their expansion to control costs. By contrast, domestic companies continued to expand vigorously and accounted for the overwhelming bulk of Grade A office occupiers. 1,500 1,000 500 0 2017 2018 2019 2020 Future Supply Q1 New Supply Outlook An international financial center and technology hub, Shenzhen continues to attract top-flight companies able to bear the prevailing rent. The city also is witnessing growth in company headquarters due to its sound business environment and favorable policies, which will drive demand for Grade A premises. Ahead, 868,600 sq m of new office supply is expected over the coming three quarters, with 80% to be located in Futian. As a result, Futian should be faced with a rising vacancy rate and falling rent. cushmanwakefield.com
Shenzhen SUBMARKET INVENTORY VACANCY RATE NEW COMPLETIONS YEAR-TO-DATE UNDER CONSTRUCTION GRADE A FACE RENT RMB/SQ M/MO US$/SF/MO EUR/SF/MO Luohu 541,813 6.7% 0 40,170 222.37 US$ Futian 2,354,677 8.9% 320,000 1,976,214 305.97 US$ Nanshan 1,059,643 31.0% 198,720 5,805,706 204.04 US$ SHENZHEN CBD Grade A Total 3,956,133 14.5% 518,720 7,822,090 267.22 US$ * Rental equals Gross Transacted Face Rental 1 USD = 6.950 RMB = 0.958 EUR Key Leasing Transactions Q1 2017 PROPERTY SUBMARKET TENANT SQ M LEASE TYPE Raffles City Office NCCC Amazon 6,000 New Setup Hisense Tower Houhai Centaline Property 10,000 Relocation China Aerospace International Center Houhai Ping An Pu Hui 4,000 New Setup Significant Projects Under Construction PROPERTY SUBMARKET MAJOR TENANT SQ M COMPLETION DATE Dinghe Building Futian - 90,000 2017 China Development Bank Financial Building Futian - 54,000 2017 Shenzhen Energy Building Futian - 90,420 2017 Bosera Asset Building Futian - 75,000 2018 China Resources Headquarters Building Nanshan - 22,000 2018 China Investmennt Headquarters Building Nanshan - 49,300 2018 Shenzhen Center (KPF 350m) Futian - 150,000 2019 Qianhai International Center Nanshan - 169,350 2019 Kerry Qianhai Center Nanshan - 120,000 2019 Note: All figures are approximate.
Shenzhen Contact Edward Cheung Chairman, Asia Pacific Board Chief Executive, Greater China Tel: +86 21 2208 0338 edward.kc.cheung@cushwake.com Cheng Jia-long Managing Director, South & West China Tel: +86 755 2151 8188 jialong.cheng@cushwake.com James Shepherd Managing Director Research, Greater China Tel: +86 21 2208 0769 james.shepherd@cushwake.com Zhang Xiao-duan Head of South & West China Research Tel: +86 755 2151 8116 xiaoduan.zhang@cushwake.com About Cushman & Wakefield Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop and live. The firm s 43,000 employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world. In Greater China, the firm has a co-branded presence under the name of Cushman & Wakefield and operates 20 offices in the region. Cushman & Wakefield is among the largest commercial real estate services firms with revenues of $5 billion across core services of agency leasing, asset services, capital markets, facility services, global occupier services, investment & asset management, project management, tenant representation and valuation & advisory. To learn more, please visit www.cushmanwakefield.com Disclaimer This report has been produced by Cushman & Wakefield for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield shall not be liable to any reader of this report or any third party in any way whatsoever. Cushman & Wakefield shall not be held responsible for and shall be released and held harmless from any decision made together with any risks associated with such decision in reliance upon any expression of opinion in the report. Our prior written consent is required before this report can be reproduced in whole or in part. 2017 Cushman & Wakefield All rights reserved.
Rent (HKD/sf/mo) Availability Rate (%) Hong Kong HONG KONG OFFICE Economic Indicators Q3 16 Q4 16 GDP 2.0% 3.1% CPI 2.7% 1.2% Unemployment Rate 3.3% 3.3% Source: Census and Statistics Department, Oxford Economics Grade A CBD Market Indicators Q4 16 Q1 17 Overall Rent (HK$/SF/MO) $120.09 $122.16 Availability 4.2% 3.6% Overall Grade A Rent & Availability $80 $78 $76 $74 $72 $70 12-Month Forecast 12-Month Forecast 8% 6% 4% 2% 0% Economy Hong Kong s GDP increased by 3.1% y-o-y in the fourth quarter of 2016, resulting in growth of 1.9% for the year. The city s labour market remained tight in the quarter with unemployment remaining unchanged at 3.3%, while growth in consumer prices slowed in the quarter to 1.2% y-o-y. Market Overview Activity in Hong Kong s office leasing market picked up strongly in the first quarter 2017 with net absorption totaling 416,288 sf. Much of the activity focused on core submarkets, including the areas of Greater Central, Wanchai/Causeway Bay, and Greater Tsim Sha Tsui which all recorded absorption of over 90,000 sf. Banking, tech, and legal firms were amongst the most active with several undergoing expansions in the quarter. Notably, international law firms are increasingly being seen to follow in the footsteps of the foreign banks in relocating out of Greater Central, with Freshfields signing a lease in Swire s One Island East in the quarter. The rebound in leasing activity, together with an absence of new supply, pushed the overall availability lower in the quarter to 6.3% from 7.0% as at the end of 2016. Due to continued strong demand for office space in Prime Central, the availability rate there fell to 2.8%, the lowest level since the global financial crisis in 2008. On the other hand, relatively weaker demand in decentralized areas such as Kowloon East and Hong Kong South left availability rates little changed in the quarter, at 10.7% and 14.1%, respectively. Overall Rent Overall Availability Rate (%) Supply Pipeline MSF(Net) 3.0 10-year Historical Average = 1.53 million sf 2.5 2.0 1.5 1.0 0.5 0.0 2017 2018 2019 2020 2021 Overall, rents in Grade A offices in Hong Kong edged higher in the quarter by 0.8% to $79.29 per sf per month. Core areas of Hong Kong Island where much of the demand has focused, however, continue to outperform the broader market, with rentals in Greater Central climbing 1.7% in the quarter to $122.16 per sf per month. Outlook Approximately 2.7 million sf of Grade A office space is scheduled for completion in 2017, the majority of which is only slated for release in the second half of the year. As such, the market is expected to come under increasing pressure as competition intensifies. Much of that, however, will be narrowly focused on Kowloon East where two thirds of the new supply is concentrated. With availability in Greater Central remaining extremely tight, rentals there are set to continue on an upward trend. As a result, the rental gap between core and decentralized areas is set to widen further, which will continue to fuel relocations by corporates seeking cost savings. www.cushmanwakefield.com
Hong Kong SUBMARKET INVENTORY (SF NET) AVAILABILITY UNDER CONSTRUCTION (SF NET) GRADE A NET EFFECTIVE RENT HK$/SF/MO US$/SF/MO EUR/SF/MO Prime Central 7,531,696 2.8% 0 136.03 US$17.51 16.22 Greater Central (CBD) 15,419,985 3.6% 0 122.16 US$15.73 14.56 Wan Chai / Causeway Bay 8,836,272 4.2% 498,400 74.11 US$9.54 8.84 Hong Kong East 7,356,522 3.5% 2,124,900 47.46 US$6.11 5.66 Hong Kong South 1,974,601 14.1% 484,600 30.04 US$3.87 3.58 Hong Kong Island Total 33,587,380 4.4% 3,107,800 85.43 US$11.00 10.19 Greater Tsim Sha Tsui 9,429,495 7.7% 282,600 66.56 US$8.57 7.94 Kowloon East 11,843,437 10.7% 4,487,400 29.72 US$3.83 3.54 Kowloon West 3,693,305 6.1% 834,200 40.90 US$5.27 4.88 Kowloon Total 24,966,237 8.9% 5,604,200 42.35 US$5.45 5.05 Overall Total 58,553,617 6.3% 8,712,000 79.29 US$10.21 9.45 *Grade A Net Effective Rent is exclusive of service charges and government rates and based on net area. US$/HK$ = 7.767; /HK$ = 8.387 as at 23 March 2017 Key Leasing Transactions Q1 2017 PROPERTY SUBMARKET TENANT SF LEASE TYPE Times Square Tower 1 Wan Chai / Causeway Bay Alibaba 105,000 Expansion PCCW Tower Hong Kong East BNP Paribas 56,000 Relocation One Island East Hong Kong East Freshfields 43,200 Relocation Infinitus Plaza Greater Central UBS AG 35,700 Relocation Lee Garden Three Wan Chai / Causeway Bay Oracle 34,500 Relocation Significant Projects Under Construction PROPERTY SUBMARKET DEVELOPER SF COMPLETION DATE 18 King Wah Road Hong Kong East Henderson 256,000 Q3 2017 Wang Chiu Road Kowloon Bay Project Kowloon East Swire 511,000 Q3 2017 Mapletree Baypoint Kowloon East Mapletree 532,000 Q4 2017 Hong Kong K11 Office Greater Tsim Sha Tsui New World 283,000 Q4 2017 Lee Garden Three Wan Chai / Causeway Bay Hysan 317,000 Q4 2017 Contacts John Siu James Shepherd Reed Hatcher Managing Director Managing Director Director, Head of Research 16/F, Jardine House Research, Greater China 16/F, Jardine House 1 Connaught Place, Central, Hong Kong 1366 Nanjing West Road, Shanghai 1 Connaught Place, Central, Hong Kong Tel: +852 2956 7088 Tel: +86 21 2208 0769 Tel: +852 2956 7054 john.siu@cushwake.com james.shepherd@cushwake.com reed.hatcher@cushwake.com About Cushman & Wakefield Cushman & Wakefield is a global leader in commercial real estate services, helping clients transform the way people work, shop, and live. The firm s 43,000 employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world. Cushman & Wakefield is among the largest commercial real estate services firms in the world with revenues of $5 billion across core services of agency leasing, asset services, capital markets, facilities services (branded C&W Services), global occupier services, investment management (branded DTZ Investors), tenant representation and valuations & advisory. To learn more, visit www.cushmanwakefield.com or follow @Cushwake on Twitter. Copyright 2017 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy. www.cushmanwakefield.com
Lettable Office Area (Ping) Rent (NTD/ping/mo) Vacancy Rate (%) Taipei TAIPEI OFFICE Economic Indicators Grade A Indicators Grade A Rent & Vacancy Rate 2,600 2,550 2,500 2,450 2,400 2,350 2,300 Q3 16 Q4 16 GDP 2.1% 2.9% Service Sector GDP 1.5% 2.0% CPI 0.7% 1.8% Source: Ministry of the Interior Note: figure is y-o-y growth Average Rent (NT$/ping/mo) Q4 16 Q1 17 2,480 2,480 Vacancy Rate 9.7% 8.0% Past 12-Month 12-Month Forecast 16 14 12 10 8 6 4 Economy Taiwan s GDP increased 2.9% y-o-y to NT$4.42 trillion (US$144.86 billion) in Q4 2016. The economy remained in positive territory thanks to strong domestic demand, such as a lively auto market and stable private investment. The tertiary sector posted 2.0% y-o-y growth in Q4 2016, while CPI accelerated to 1.8% y-o-y. Market Overview Taipei s Grade A office rents held firm, averaging NT$2,480 (US$81.45) per ping per month at the end of Q1. Rental levels were stable across all office submarkets. Among individual properties over the quarter, the highest rent shown in the Actual Price Registration was 80F Taipei 101 Building (NT$3,803/US$124.75 per ping per month), followed by 21F Taipei 101 Building (NT$3,675/US$120.56 per ping per month) and 17F Walsin Xinyi Building (NT$3,570/US$117.11 per ping per month). Leasing activity was robust with take-up of 11,400 ping in Q1, driving down the citywide vacancy rate 1.7 percentage points q- o-q to 8%. Xinyi District saw the largest vacancy drop among submarkets at 6.2 percentage points q-o-q with 3,600 ping net absorption, followed by Dunbei/Minsheng District at a 3.5 percentage point decline. 2,250 2,200 Rent Vacancy Rate 2 0 Dunnan and Xinyi districts recorded several notable leasing transactions in Q1. Flelis International and its affiliated company, Taiwan Shiseido, relocated from Western to Dunbei/Minsheng District to take up 2,170 ping in the Fubon Life Insurance Dunnan Building. Supply Pipeline 60,000 50,000 40,000 10-year Historical Average = 12,055 ping 30,000 20,000 10,000 0 2017 2018 2019 2020 Delivery of a flood of new quality office buildings stimulated relocation demand in Q1. Relocations from non-grade A offices to Grade A offices led the way at about 5,000 ping. Outlook The market will receive approximately 59,000 ping of new office supply in 2017. A supply surge of new Grade A buildings will continue to put short-term pressure on vacancies in some districts. Elsewhere, Taiwan Cooperative Bank announced a move to the Headquarters Building in Q3 and plans to lease out 10,000 ping of unoccupied space. Meanwhile, pre-leasing activity in the Nan Shan Plaza is strong, attracting large-sized tenants looking to relocate. cushmanwakefield.com
Taipei SUBMARKET INVENTORY (Ping) VACANCY RATE NEW UNDER COMPLETIONS CONSTRUCTION YEAR-TO-DATE (Ping) (Ping) GRADE A RENT NTD/Ping/MO USD/SF/MO EUR/SF/MO Western 46,800 3.7% 0 0 2,100 US$1.94 1.80 Nanjing/Songjiang 35,700 21.5% 0 0 2,070 US$1.91 1.77 Dunbei/Minsheng 166,000 11.0% 29,600 41,500 2,280 US$2.10 1.95 Dunnan 103,700 2.6% 0 0 2,410 US$2.23 2.06 Xinyi 306,800 7.2% 29,400 51,800 2,930 US$2.70 2.51 Taipei City 659,000 8.0% 59,000 93,300 2,480 US$2.29 2.12 1USD= 30.484 NTD, 1EUR= 32.868 NTD Key Leasing Transactions Q1 2017 PROPERTY SUBMARKET TENANT PING LEASE TYPE Fubon Life Insurance Dunnan Bldg Dunnan Taiwan Shiseido 1,570 Relocation Union Jiajia Bldg Nanjing/Songjiang AIA International 1,120 Fubon Life Insurance Dunnan Bldg Dunnan Flelis International 600 Shin Kong Life Tower Western East Bright Star Technology 570 Relocation Relocation Relocation Shin Kong Life Tower Western G.T Universal Technology 570 Relocation Xinyi 105 Building Xinyi China Bank 520 Expanded Lease Significant Projects Under Construction PROPERTY SUBMARKET MAJOR TENANT PING COMPLETION DATE Taiwan Cooperative Bank Headquarters Building Dunbei/Minsheng - 29,600 2017 Nan Shan Plaza Xinyi Regus Business Centre 29,400 2017 Cathy Minsheng Jianguo Building Dunbei/Minsheng - 11,900 2018 UDN Zhongxiao Building Xinyi - 11,000 2018 Taipei Dome Xinyi - 11,400 2018 Note: All figures are approximate.
Taipei Contact Billy Yen Managing Director Head of Taiwan Tel: +886 2 8788 3288 billy.pl.yen@cushwake.com Wendy Hsueh Director Head of Consulting and Research Taiwan Tel: +886 2 8788 3288 wendy.hj.hsueh@cushwake.com James Shepherd Managing Director Research, Greater China Tel: +86 21 2208 0769 james.shepherd@cushwake.com Charlie Yang Director Head of Valuation & Advisory Services Taiwan Tel: +886 2 8788 3288 charlie.ct.yang@cushwake.com Mei Chiang Associate Director Head of Tenant Representation, Corporate Client, Taiwan Tel: +886 2 8788 3288 mei.chiang@cushwake.com About Cushman & Wakefield Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop and live. The firm s 43,000 employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world. In Greater China, the firm has a co-branded presence under the name of Cushman & Wakefield and operates 20 offices in the region. Cushman & Wakefield is among the largest commercial real estate services firms with revenues of $5 billion across core services of agency leasing, asset services, capital markets, facility services, global occupier services, investment & asset management, project management, tenant representation and valuation & advisory. To learn more, please visit www.cushmanwakefield.com Disclaimer This report has been produced by Cushman & Wakefield for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield shall not be liable to any reader of this report or any third party in any way whatsoever. Cushman & Wakefield shall not be held responsible for and shall be released and held harmless from any decision made together with any risks associated with such decision in reliance upon any expression of opinion in the report. Our prior written consent is required before this report can be reproduced in whole or in part. 2017 Cushman & Wakefield All rights reserved.