Office space demand shrank by 40% in 2012

The demand for office space across China continued to decrease in 2012 due to the sluggish economy, with net absorption falling over 40 percent year-on-year, data from real estate service provider CBRE showed on Thursday.

In response to the slowdown of the domestic economy — compounded by a number of uncertainties in the global economy — many multinational companies suspended their expansion plans in China in 2012.

A number of domestic companies have also slowed down the pace of their business expansion, which had a profound impact on the office market.

From a regional perspective, the net take-up in eastern and northern China each shrank by more than 50 percent. On the other hand, the market in western China stood out with an 8 percent year-on-year growth in net take-up, thanks to the central government's Go West policies as well as the ongoing development of the local office market.

In terms of supply, numerous offices that had originally been scheduled for completion in 2012 delayed their construction schedules in response to economic uncertainty both in China and abroad. This caused the amount of new supply to decrease 30 percent year-on-year.

Against a backdrop of significant decrease in demand, vacancy rates increased to 12.8 percent in 2012, the first rise of 1.1 percentage points year-on-year after three consecutive years of decline.

Rental growth was 3.6 percent year-on-year nationwide.

In Beijing, office rental rates saw double-digit growth for three consecutive years due to tight supply. Among second-tier cities, Wuhan also experienced double-digit growth in office rents for two years in a row.

In 2013, CBRE expects new office supply to remain abundant, most of which will come from emerging areas. Over the next few quarters, office vacancy rates in China will continue to rise, and rents will be under some pressure — especially for offices located in newly developed areas.