How will new office supply impact major Chinese mainland cities in the next 2-3 years?

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New Office Supply Set to Peak in Major Chinese Mainland Cities, Pressuring Landlords

Over the next two to three years, a significant influx of new Grade A office supply is anticipated in most major Chinese mainland cities, leading to increased competition and a greater need for landlords to enhance their market competitiveness. This supply surge is expected to create opportunities for tenants, with vacancy rates and rental levels remaining favourable, and landlords adopting more flexible approaches amidst a gradual economic recovery. Occupiers can anticipate attractive leasing terms and a wider selection of available spaces in the market.
Substantial New Supply Entering Key Markets

Several major cities are poised to experience a considerable increase in office inventory. Shanghai is projected to see 2.58 million square meters of new supply enter the market between the second half of 2025 and 2027, which will represent 14.6% of its current stock. Shenzhen is scheduled to welcome approximately 1.2 million square meters of new supply in the latter half of 2025. Looking ahead to 2027, Guangzhou is expected to have 2.39 million square meters of new space become available. Furthermore, Chengdu anticipates nearly 1.0 million square meters of new supply entering the market from the second half of 2025 to 2027.
Pressure on Vacancy and Rental Levels

The substantial new supply, particularly in cities like Chengdu, is anticipated to elevate vacancy rates and exert downward pressure on rental prices. In Chengdu, this supply influx, coupled with tenants' efforts to reduce costs, is expected to create a challenging environment. Similarly, Guangzhou's market will continue to face pressure on vacancy rates and rental levels due to fierce competition, with headquarter-type properties making up over half of the new supply.
Tenant Opportunities Amidst Market Dynamics

The prevailing market conditions present significant advantages for tenants. Shaun Brodie, Head of Research Content, Greater China at Cushman & Wakefield, noted that the Grade A office market continues to offer opportunities with favourable vacancy rates and rental levels. The flexible approach adopted by landlords, driven by the gradual economic recovery, means occupiers can continue to benefit from attractive leasing terms and a broader choice of office spaces.
Landlords' Need for Enhanced Competitiveness

In response to the impending supply peak and evolving tenant demands, landlords will need to actively strengthen their market competitiveness. This will be crucial for attracting and retaining tenants in an increasingly competitive landscape. While the specific strategies landlords may employ are not detailed, the emphasis is on maintaining appeal and offering value in a market where tenant choice is expanding.

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How will new office supply impact major Chinese mainland cities in the next 2-3 years?

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