Traditional financial sector remains active in office market; Green shoots of recovery of retail are visible
Office net absorption in tier I cities nearly doubled y-o-y in Q1 2017 thanks to robust demand in Guangzhou and Shenzhen.
Demand also stablised in tier II cities, which helped overall net absorption increase by around 60% q-o-q nationwide.
Green shoots of recovery were visible in the retail sector in Q1 2017. The February consumer confidence index rose to 112.6, a 10-year record high. Experiential retail continued to perform well.
Tenants continued to adopt leasing strategies reflecting local market fundamentals. Demand continued to be led by Third-Party Logistics (3PL) firms, with solid leasing activity reported in Chengdu, Chongqing, Shanghai and a number of tier II and tier III cities in East China.
The government implemented several new policies in Q1 2017 in a bid to lower leverage ratios. Authorities intend to keep monetary policy neutral as they seek to deflate the expanding asset bubble.