China office market vacancy rate driven to 3.0% historical low in 2Q14

Thanks to solid domestic firm demand.

In Beijing, strong demand by domestic firms, reflected by exceptionally strong net absorption, reversed four quarters of rental decline, sending the vacancy rate to a historical low of 3.0%.

According to a research note from Knight Frank, meanwhile, with no new supply for two subsequent quarters, rents in Guangzhou inched upward and its vacancy rate dropped.

Shanghai is moving at two speeds: rents slid 4.2% quarter-on-quarter in Puxi but climbed 3.9% in Pudong, widening the rental gap, as the vacancy rate in the latter reached a record low of 0.6%, 5.3 percentage points lower than that in the former.

Here's more from Knight Frank:

In Hong Kong, while demand from MNCs in the financial sector eased, Chinese tenants are picking up the slack. Overall, rents were steady.

Singapore continued to benefit from a combination of healthy demand, an increase in the take-up of large office space in and a tight supply pipeline, all of which continue to propel rents upwards.

This is despite the continued decentralisation of a number of tenants, led by the public sector.