Concerns of oversupply in supertall office buildings threaten China

Also in line with shadow banking industry.

While new supply of supertall office buildings continues to increase, the recent slowdown in the Chinese economy combined with tighter controls on the shadow banking industry has resulted in weaker demand from the financial sector. This has led to growing concerns of oversupply in a number of markets.

According to a release from CBRE, although office demand in China will continue to rise in the long term as the country continues to transition to a tertiary industry-driven economy, the level of demand in tier II cities will remain relatively weak compared to Beijing and Shanghai.

The report noted that this is because of these two markets being already firmly established as the country’s political, economic and financial hubs.

Here's more from CBRE:

“CBRE Research believes that the existence and future completion of a large number of supertall office buildings in tier II cities such as Shenyang, Chongqing and Tianjin undoubtedly creates a risk of oversupply.

These cities are merely regional hubs within China—not national or international financial centers—and lack the means to attract a significant volume of financial sector occupiers to their market.

It is imperative that local governments be more realistic when forecasting office demand and planning land supply in order to ensure their city’s stable economic development,” said Jonathan Hsu, Director at CBRE Research.

The topic of oversupply was also broached in the recent CBRE Research special report, China Offices: Reality Check.

Over the next five years the number of supertall office buildings in China (Shenzhen, Shenyang, Chongqing, Tianjin and Nanning) and South Korea (Seoul and Busan) will surge whilst Indonesia (Jakarta) will see the completion of its first supertall office building.

“Financial sector demand will be insufficient to fill the large volume of new supply but this could provide opportunities for multinational occupiers in other sectors to secure high-quality prestigious office space in good locations for relatively cheap rents,” Mr Hsu adds.