Office prices in Guangzhou to increase in 3Q 2010

GUANGZHOU: Sales prices of offices in Guangzhou, China are expected to increase in 2H2010 despite a new supply of office space coming on-stream in 3Q 2010, according to Colliers International’s latest report on Guangzhou’s office market.

In 2Q 2010, the average sales price of Grade A offices in Guangzhou was 23,900 yuan psm (RM11,317 psm), a marginal increase from 23,800 yuan psm in 1Q2010.

The research house said that although the total transaction of newly completed office buildings were declining in 2Q2010, the investment demand for high quality office spaces remained strong, with domestic investors continuing to dominate the market.

The continuing recovery of the external economy, supportive government policies and the upcoming Asian Games have helped spur demand for leasing and sales in office space.

The Asian Games, which would be held here in November this year, is expected to attract domestic and foreign finanaces, as well as trading corporations to enter Guangzhou, said Colliers.

The strong performance of the office market can also be attributed to the depressed residential market, which saw the introduction of several national marco-control policies by the government to curb rising house prices. In the face of a depressed residential market, investor turned their focus to commercial property such as offices.

Meanwhile, most of the new supply of office spaces scheduled to enter the market this year have been postponed to next year due to the Asian Games. Because of the current limited office space, rent rates are expected to increase.

In the quarter under review, 66,370 sq m of new supply was recorded, bringing the total stock of Grade A offices in Guangzhou to about 1.82 million sq m. Several projects including Onelink Hui and South Tower of GT Land Plaza are scheduled for completion in 3Q2010, adding a new supply of over 134,000 sq m to the market.

The second quarter of 2010 also saw active leasing activity, most of which were centered on the newly completed Poly Centre with mostly domestic enterprise as tenants.

Several transacted leases were more than 1,000 sq m, chief among them was one taken by Wringley Company, which leased more than 6,000 sq m in R & F Center.

The overall vacancy rate dipped 7.9% quarter-on-quarter to 15.2%. However, with the large new supply coming on-stream in 3Q 2010, vacancy rate is expected to rise.

The average rental rate in 2Q2010 registered a slight increase to 134 yuan psm per month compared to last quarter.

The highest rental rate is still recorded in Tianhe district, one of the three core business districts in Guangzhou, which reached 146 yuan psm per month, followed by Yuexiu district with 103 yuan psm per month (a drop of 3% q-o-q), while Haizhu district recorded an average rental rate of RMB 95 yuan psm per month.

Poly Centre, which overlooks a river, commanded a higher than the market average rental rate of 140 yuan psm per month.