the economic situation of a city can be seen through the data of net absorption of class A office buildings.
According to the latest data, the vacancy rate of Grade A office buildings in Shenzhen has continued to decline for four quarters, and the annual net absorption has exceeded one million square meters for the first time. It can be predicted that the total stock of Grade A office buildings in Shenzhen will exceed ten million square meters in 2022, which fully reflects the healthy and good trend of Shenzhen economy.
Strong rebound in demand for class A office buildings
It was learned from the just concluded Savills' latest quarterly press conference that in the first three quarters of 2021, the GDP of Shenzhen increased by 7.1% year-on-year to about RMB 2.18 trillion, with an average annual growth rate of 4.8% in the two years. The city's regional GDP ranks third in the country, and its economy remains stable and positive. Among them, the added value of the tertiary industry increased by 8.3% year-on-year to about RMB 1.4 trillion, accounting for 63.8%.
Shenzhen's good economic situation is very obvious in the data of class A office buildings. In 2021, the new supply of Grade A office buildings in Shenzhen reached 982000 square meters. Among them, three projects were delivered to the market in the fourth quarter, bringing a total of 435000 square meters of office space to the market. By the end of the year, the city's total stock had risen to 9.288 million square meters, with a year-on-year expansion of 11.8%.
rental data are also good. In 2021, the grade A office rental market in Shenzhen rebounded strongly, and the annual net absorption of the city recorded 1.176 million square meters, breaking one million square meters for the first time, a record high. Among them, in the fourth quarter, the leading enterprises in the TMT industry continued the strong expansion trend of the previous quarter and reached several eye-catching transactions of more than 10000 square meters during the quarter. In addition, the demand for leasing in the financial, retail and trade industries continued to be active. Thanks to this, the city's net absorption in the fourth quarter hit a record high in a single quarter, reaching 440000 square meters.
Against the background of strong growth in rental demand, the average vacancy rate of Grade A office buildings in Shenzhen has continued to decline for four consecutive quarters since the beginning of the year. By the end of the year, the city's average vacancy rate had decreased by 1.2 percentage points month on month and 5.2 percentage points year-on-year to 22.7%, the lowest in the past two years.
However, it is worth noting that although the market demand remains strong, at the end of the year, some owners are still willing to provide small rent concessions for tenants to further improve the occupancy rate of the project. By the end of the year, the rent of Grade A office buildings in the city had therefore decreased to RMB 184.1 per square meter per month, and the rent index had decreased slightly by 0.2% month on month and year on year.
Looking ahead, in 2022, 18 new projects are expected to enter the market in Shenzhen, bringing a total supply area of 1204000 square meters to the market. By then, the total stock of Grade A office buildings in the city is expected to exceed 10 million square meters.
The expectation of continuous growth of local economy and tertiary industry is expected to further enable the activity of Shenzhen office rental market. TMT and financial industry will still maintain rapid development to support the growth of market rental demand. However, the market deregulation pressure may increase again due to the entry of millions of new supply, and the vacancy rate of the city is expected to rise.
Despite steady economic growth and strong market demand, rental competition remains under supply pressure, and the average rent is expected to decline.
net retail intake reached the highest since 2018
The increase of population and income enables the development of local consumer market and promotes the rapid development of Shenzhen retail property market.
According to the data of the seventh national census, by the end of 2020, the permanent resident population of Shenzhen had reached 17.56 million, an increase of 68.5% over 2010, ranking the first in the province and among the first tier cities. In the first three quarters, the per capita disposable income of Shenzhen residents was 55209 yuan, a year-on-year increase of 10.6%. Overall, the city's consumer market maintained positive growth. In the first three quarters of 2021, the total retail sales of social consumer goods in the city reached 695.902 billion yuan, a year-on-year increase of 15.1%, an increase of 4.9% over the same period in 2019 before the epidemic, and an average increase of 2.4% in the two years. Among them, retail sales increased by 14.6% year-on-year, and catering revenue increased by 19.4% year-on-year.
In 2021, the market rental demand is active. In addition to catering, fashion and accessories, the demand for experience brands such as personal care, parent-child facilities, leisure and entertainment also remains positive. Thanks to this, the city's net absorption this year recorded 839000 square meters, the highest since 2018, about 1.9 times the average value in recent ten years (449000). Among them, in the fourth quarter, in view of the high occupancy rate of new projects, the city's net absorption increased by 36.9% month on month to 443000 square meters, the highest since the outbreak of the epidemic.
In view of the active expansion of retailers in Shenzhen during the year, the vacancy rate in many sub markets decreased significantly, driving the average vacancy rate of the city to decline for the third consecutive quarter. By the end of 2021, the average vacancy rate of Shenzhen retail property market had decreased by 1.0 percentage points month on month and 2.1 percentage points year-on-year to 7.5%. Benefiting from the improvement of brand level, the rents of several stock projects increased. Under the background of the optimization and improvement of the overall market performance, the average rent of the first floor in the city recorded RMB 631.6 per square meter per month, and the rent index of the city increased by 0.4% month on month and 1.4% year-on-year.
Next year, Shenzhen is expected to usher in the opening of five high-quality retail projects, with a total retail construction area of 447000 square meters. On this basis, Shenzhen will continue to attract brands to actively enter and expand, the overall brand level of the market will be significantly improved, and the demand for brand leasing is expected to remain active. At that time, the vacancy rate in the city is expected to continue to fall. Overall, affected by the successive entry of emerging business district projects into the market, the average rent level of the city is expected to decline structurally.
housing demand is becoming more rational
In 2021, due to the impact of the continuous upgrading of regulatory policies, the pushing pace of residential developers slowed down.
According to Savills' review and Prospect of Shenzhen real estate market in the fourth quarter of 2021, as of December 20, the supply area of Shenzhen primary housing market decreased by 3.9% year-on-year to 6.261 million square meters. Among them, the market supply area in the fourth quarter reached 2.082 million square meters, a month on month decrease of 8.1% and a year-on-year decrease of 31.2%.
Over the same period, many high-quality projects with perfect supporting facilities successively entered the market and were favored by buyers, and the total volume of market transactions continued to grow. The annual transaction area reached 5.535 million square meters, a year-on-year increase of 8.7%. However, in the fourth quarter, due to the limited market supply, the decision-making process of just in need buyers also became more rational. The transaction area of the whole city decreased by 13.3% month on month to 1.215 million square meters.
It is worth noting that driven by the centralized entry of a large number of high-quality projects in core areas, the average transaction price of first-hand houses in Shenzhen increased by 13.3% year-on-year to RMB 63920 per square meter. However, as the market transactions in the fourth quarter were concentrated in emerging regions, the number of transaction sets accounted for 88.3%, and the structural average transaction price of the city decreased by 19.6% month on month to RMB 59908 per square meter. Savills believes that under the background of phased achievements in the regulation policy, Shenzhen will accelerate the construction of long-term mechanism in the future to promote the healthy and stable development of the real estate market. Nevertheless, the regulatory policy in 2022 is expected to maintain a certain flexibility, and the mortgage interest rate may be reduced to better meet the reasonable housing needs of just in need buyers and alleviate the liquidity crisis of real estate enterprises.
Meanwhile, in 2022, Shenzhen will continue to increase the supply of residential land, optimize the supply side structure, and the tight supply situation will gradually improve. The local population is expected to continue to maintain rapid growth, and the potential demand for housing is still strong, but the cautious and rational mood of home buyers in the decision-making process is expected to continue.
Under the follow-up impact of multiple regulation policies during the year, the price of primary housing market in Shenzhen is expected to remain stable in 2022.
(E company)
