High Office Empty Rate in Major Chinese Cities Indicates a Collapsing Economy

It was reported on 30th June, at the end of Q2, 2022, the vacancy rate of Grade A office buildings in Guangzhou recorded 9.6%, an increase of 1% compare to last month. At the same time, the vacancy rates in Shenzhen and Beijing were 22.4% and 13.9% respectively. The data of Shanghai is not yet collected.

The main tenants of office buildings are enterprises. When the economy is uncertain, enterprises are being cautious about expansion. Most of them choose to stay in current office or reduce current office space to save operating costs. To reduce overheads, many even choose to relocated to suburb area. When large areas of office space are vacant, it indicated that companies are facing difficult situation and economic downturns. Taking Guangzhou as an example, in 2021, industries such as TMT (telecommunications, media and technology), financial industry, trade and retail ranked top three for Grade A office leasing demand. Today, the two major industries of TMT, trade and retail have slowed down due to structural adjustment, but the demand in the financial industry is relatively active.

Data from Cushman & Wakefield shows that in the first half of 2022, the total leased area of ​​TMT, trade and retail accounted for 26.1%, a decrease of 16.3% from the end of 2021. During the same period, the leased area of ​​the financial industry accounted for 23.6%, an increase from the end of 2021 6.4 %. In the first half of 2022, the net leasing area of the Guangzhou Grade A office market was 187,000 square meters, a slight decrease of 4.59% year-on-year, reflecting the significant decline in Communist China’s economic vitality under the background of the pandemic and the tension between the Communist regime and the United States.