Office landlords in China’s largest commercial hubs are rolling out more than 10 new projects in 2023, challenging owners of existing properties to compete for tenants and align their offerings with changing occupier demand, according to agency statistics.
In Shanghai developers are launching more than 1.2 million square metres (12.9 million square feet) of new office properties during 2023, according to research by Savills, after three new projects totalling 319,300 square metres were delivered in the first three months of 2023.
Further to the north, Beijing landlords are introducing 570,000 square metres of new office space in 2023, while demand remains “uneven,” Savills’ analysts show.
Despite this surge in supply, however, landlords who have kept their projects up to date, whether through flexible office offerings or upgraded facilities, are able to achieve rent increases this year the study shows, while owners of commodity properties are struggling with falling leasing rates.
Meeting Tech Requirements
A report published late last year by China’s State Council Information Service shows that after doubling in value over the past decade, the mainland’s digital economy was worth RMB 45.5 trillion in 2021, ranking it second globally after the US.
Now Dutch bank ING is projecting that China’s cyber-sector is likely to account for 40 percent of the country’s economy by 2030 and have a value of RMB 80 trillion – nearly double the 2021 figure.
And these tech giants are looking for flexible space.
A CBRE survey this year of tech occupier preferences globally show that flexible space accounted for 18 percent of the industry footprint in 2022, with that slice expected to expand to 23 percent in 2024.
Among the reasons that tech firms gave for choosing flexible office space, reducing capex and testing new markets ranked as the most important considerations, with 47 percent of survey respondents citing each of these as factors in their decisions.
For respondents from Asia Pacific, 43 percent of the tech firms surveyed said they have at least begun experimenting with flexible office space, with the same percentage already having put in place an approach of using flexible office space, depending on the situation.
Flex Facilities Boost Demand
This demand from occupiers, combined with rising competition from new projects entering the market, is motivating landlords to look at incorporating more flexible office features and facilities both in existing buildings and into new developments entering the market.
A 2022 CBRE survey showed that 43 percent of occupiers in Asia Pacific preferred buildings with shared meeting spaces available, while 39 percent wanted a flexible office facility such as a co-working centre in the property.
This trend is also reflected in a 2023 report by the Urban Land Institute (ULI), which showed that over half of landlords globally say they will be investing more in establishing flexible office space in their properties.
“For our headquarter locations, we are still looking for 15-year leases. But our general approach is we want flexible space to account for around 10 per cent of the offices in our portfolio, bringing down the weighted average by at least by one or two years provide more flexible space to create more demand,” one representative of a global occupier was cited as saying in the ULI report.
Partnerships for Progress
With more than 3,500 locations in 120 countries worldwide under its Regus, Spaces, HQ and Signature brands, IWG is already partnering with landlords in China and across Asia Pacific to incorporate flexible offices into their properties.
In November last year IWG unveiled a strategic cooperation agreement with Shui On Land’s Shui On Workx office business management division to promote hybrid working facilities in mainland China.
“IWG is already working with some of the best-known developers in mainland China’s top markets to create commercial communities to enhance portfolio values,” said IWG regional partnerships sales director Yan Xiang. “With our company’s experience in designing and managing flexible workspaces, and the power of our brand support, we are eager to work with like-minded partners to create market-leading properties.”
Long established as the world’s largest provider of flexible working solutions, IWG helps landlords and franchisees worldwide to join the workspace revolution. Find out how the IWG team can support you today.