Tier II Office Markets Remain Under Pressure; Authorities Tighten Residential Policy


Office

Year-to-date total net take up declined by 25% compared to the same period of 2015, due mainly to the economic slowdown and the crackdown on the P2P financial sector. However, the service sector is emerging as a new engine of growth.
Retail

New completions this quarter were mostly regional or community malls in decentralised areas and residential catchments. Backed by the growing number of residents in suburban areas, new malls in tier I cities reported occupancy rates of over 90%.
Logistics

New supply of modern logistics space in Q3 2016 fell to 360,000 sq. m., the lowest quarterly figure for three years. E-commerce demand in upper tier cities slowed as market penetration is already very high.
In addition, disappointing foreign trade data weighed on demand in some port-cities including Shanghai.
Residential

Rapidly increasing housing prices prompted another round of tightening measures this quarter, with the government seeking to ensure already high land prices do not further boost housing prices. With many homebuyers disqualified from making further purchases, investor sentiment in major cities has weakened. However, given the current low inventory level, a price correction is unlikely to occur before Q2 2017.