Focusing on the building economy, Savills has partnered with Pearl River City to explore new drivers of urban development

On 28 March, Savills and Pearl River City Real Estate Co., Ltd. held a media conference in Guangzhou for the first quarter of 2024 in Pearl River City, Guangzhou, authoritatively releasing the report "Review and Outlook of Guangzhou Real Estate Market in the First Quarter of 2024".

Liu Weihai, Managing Director and Vice Chairman of Savills Guangzhou, Xie Jingyu, Head of Market Research in Southern China, Li Qingshan, Head of Commercial Building and Senior Director of Commercial Building in Southern China, Wang Wei, Head of Property and Asset Management in Southern China, and Liu Huanting, Head of Leasing Department of Pearl River City Real Estate Company, attended the event and reviewed the latest developments of Guangzhou's real estate market in the first quarter of 2024 with many mainstream media, and conducted in-depth discussions on topics such as office buildings and urban development.

In his speech, Liu Weihai, Managing Director of Savills Guangzhou and Vice Chairman of Southern China, expressed his gratitude to our partner Pearl River City for their strong support and shared his expectations for Guangzhou's future development: "At this year's high-quality development conference, Guangzhou proposed a new urban development strategy and a new spatial layout plan. Savills has been deeply involved in Guangzhou's local market for nearly 30 years, and has continued to make efforts in various fields such as old city renewal, industrial upgrading, investment attraction and urban operation, and will continue to follow the policy guidelines in the future to contribute to the urban development of Guangzhou and the Guangdong-Hong Kong-Macao Greater Bay Area. ”

Interpret market trends and look forward to commercial real estate opportunities

At the press conference, Xie Jingyu, Head of Market Research at Savills South China, gave an in-depth analysis of the dynamics and development trends of Guangzhou's real estate market in the first quarter of 2024, and looked forward to the future development prospects.

Office – Tenants fell by 1.4% QoQ as companies actively optimized and integrated office leases, and landlords adopted diversified rent concessions and de-escalation strategies

§ In 2023, Guangzhou's GDP exceeded RMB3 trillion for the first time, reaching RMB3,035.573 billion, representing a year-on-year increase of 4.6%. Among them, the added value of the tertiary industry was RMB2,226.224 billion, up 5.3% year-on-year. According to the work report of the Guangzhou Municipal Government, Guangzhou's GDP is expected to grow by no less than 5% in 2024.

§ In the first quarter of 2024, two new projects entered the market in the traditional core business district of Guangzhou's Grade A office property market, bringing a total of 127,000 square meters of supply area. At the end of the quarter, the total stock of traditional core business districts increased by 1.8% QoQ and 9.2% YoY to 7.073 million sq m.

§ During the quarter, companies actively optimized and integrated office leasing, the leasing market became more active, and several high-quality projects also recorded high-profile leasing transactions. Despite this, most of the new leasing enquiries in the quarter are still waiting to be translated into transactions in the coming quarters, and the quarterly net absorption of the market fell back to 8,000 square meters. Against this backdrop, and with the structural impact of new supply, the average vacancy rate in traditional core business districts increased by 1.4 percentage points quarter-on-quarter and 3.6 percentage points year-on-year, reaching 19.0% at the end of the quarter.

§ Information Technology, Professional Services, Manufacturing and Finance were active in the quarter, with more than half of the deals reached originating from these sectors in terms of the number of deals closed, while the Healthcare, Public Institutions and Consumer Services sectors ranked the top three in terms of transaction area, due to the larger amount of related companies occupied.

§ Despite the continued recovery of leasing activity, given the high supply pressure in the current market, landlords are more likely to continue their aggressive de-engagement strategies and provide tenants with more diversified rental concessions. As a result, the rent index of the city's traditional core business districts decreased by 1.4% month-on-month and 4.7% year-on-year, with an average rent of RMB142.2 per square metre per month.

§ In the second quarter of 2024, two new projects are expected to enter the market in the traditional core business district, bringing a total of 91,000 square meters of supply area. At that time, the total stock of the market will rise by another 1.3% month-on-month.

§ In 2024, the market is expected to record more deals and net absorption will pick up as the cumulative leasing demand from the first quarter is realized. At the macro level, driven by the positive response to the central government's acceleration of the development of new quality productivity, the leasing demand from industries such as science and technology, information technology, and new energy is expected to grow.

Retail - The upgrading and adjustment of high-quality projects enabled the brand penetration to increase, and the city's vacancy rate decreased by 0.2 percentage points month-on-month

§ In the first two months of 2024, Guangzhou's consumer market maintained steady growth, with the city's total retail sales of consumer goods reaching RMB202.409 billion, up 6.5% year-on-year and 4.5 percentage points higher than the same period in 2023.

§ In the first quarter of 2024, no shopping malls will open in the city, and the total market stock will remain at 7.531 million square meters.

§ During the quarter, the city's average vacancy rate decreased by 0.2 percentage points quarter-on-quarter and 2.9 percentage points year-on-year to 12.6% due to the continuous improvement of the occupancy performance of a number of existing projects. During the period, F&B brands continued to dominate the overall market demand, and driven by the upgrading and adjustment of high-quality projects in core business districts, the market also introduced several well-known fashion and fragrance brands to enter Guangzhou for the first time or expand their stores.

§ During the quarter, landlords actively attracted investment but cautiously adjusted rents, and the rental level of existing projects was basically similar to that at the end of last year. As a result, the city's rent index remained flat month-on-month, with an average rent of RMB618.9 per square metre per month.

§ In the second quarter of 2024, no new supply is expected to enter the market. In the second half of the year, three shopping malls are expected to open, adding a total of 266,000 square meters of retail space.

§ In the future, with the continuous brand upgrading activities of benchmark projects, more well-known brands are expected to land, and the first-store economy is expected to be further developed. Thanks to this, the occupancy rate and rental level of the core business district are expected to remain stable. For sub-core business district projects, the key to boosting the asset performance of the projects is to actively adjust their operation and investment strategies in response to changes in consumer preferences to avoid the risk of homogeneous competition.

Residential – The new deal is good for the rebound in housing sales, but the transaction sentiment remains cautious, and the transaction volume is still at a low level

§ In the first quarter of 2024, the first-hand residential supply in Guangzhou decreased by more than 50% quarter-on-quarter to 297,000 sq m. Despite this, a number of high-quality projects were launched in the central city during the quarter, with the supply area surpassing that of the suburban area for the first time in five years.

§ During the quarter, Guangzhou further optimized its home purchase policy, and the number of market views and inquiries increased, but home buyers remained cautious about closing a deal, and the quarterly transaction volume hovered at a low level.

§ During the quarter, in the context of cautious market transactions, most developers increased price concessions to promote decentralization. As a result, for most projects, the average transaction price of comparable calibers has been reduced. Despite this, the average transaction price in the city increased by 1.4% QOQ to RMB44,748 per square metre, due to the higher average transaction prices of some new projects launched in the central urban area.

§ During the year, several improvement projects in the central urban area will be launched into the market one after another, which is expected to stimulate the release of potential purchasing power in the market and drive the recovery of transaction volume.

§ Although most developers are expected to continue to adopt price-for-volume measures to promote decentralization, the average price in the city may continue to rise structurally due to the impact of high-priced projects in the central urban area.

Shaping a green and dynamic space to empower ESG sustainable development

Located in the core area of the CBD of Zhujiang New Town, Guangzhou, Zhujiang City Building is an ultra-high-quality, ultra-low energy consumption and green building with "zero energy consumption" as the highest design goal. Combined with the climate of Guangzhou, the building integrates 11 advanced energy-saving and environmental protection technologies such as solar energy and wind energy to realize the utilization of renewable energy, while creating a healthy, comfortable and quiet green indoor environment, it is committed to the practice of energy conservation and emission reduction, energy recovery and regeneration, and redefines the possibility of sustainable design in super high-rise buildings.

Designed by SOM, the project has a total floor area of 216,000 square meters, a design height of 309.6 meters, and 71 floors. The building adopts 11 green environmental protection technologies such as water-cooled radiant air conditioning with demand-based ventilation, energy heat recovery, solar power generation, wind power generation, etc., and matches high-end business facilities such as international conference centers, Chinese and Western catering, staff restaurants, leisure and fitness, banks, and panoramic halls, and takes the lead in achieving carbon neutrality in 2022 with advanced practices in high-quality indoor health and comfort index, new energy applications, energy conservation and emission reduction, and smart buildings. In addition, the building has been awarded the "Guangzhou Super Grade A Commercial Office Building", and has successively won LEED-CS and O+M EB double platinum certifications, CTBUH "The World's 50 Most Influential High-rise Buildings in the Past 50 Years", CTBUH "Ten Year Award", "Zero-carbon Digital Intelligence Energy Saving and Carbon Reduction Five-Star Building" and other honors.