According to the survey data of the China Real Estate Index System Shop Rental Index on the rental samples of stores in major commercial streets and typical shopping centers in key cities across the country, in the first half of 2020, the rental level of stores in China's major commercial streets and stores in key business districts (shopping centers) fell overall.

Under the influence of the new Crown pneumonia epidemic, residents' production and life are restricted, consumption activities are reduced, and the commercial real estate market is facing challenges; but on the other hand, the epidemic accelerates the change of consumption habits in the Internet era, and a new pattern in the commercial real estate industry will gradually take shape. Against this background, based on the analysis and summarization of past research experience and the current development of the commercial real estate industry, CIRCI carries out the research and compilation of the commercial real estate index of the China Real Estate Index System, which mainly covers the store rental index and the office rental index, to objectively reflect the price level of commercial real estate in key cities and their changing trends.

According to the survey data of China Real Estate Index System's Office Rental Index on office rental samples in major business districts of key cities across China, in the first half of 2020, the overall level of office rentals in major business districts of key cities across China dropped by 2.38%; among them, the average rent in the second quarter was RMB4.8 per square meter per day, a drop of 1.54% compared to that in the first quarter. From the perspective of business districts, 10.0% of business districts saw office rents rise in the second quarter, 87.5% of business districts saw rents fall in the second quarter, and 2.5% of business districts saw rents remain unchanged from the previous period. Overall, the domestic economy gradually recovered in the second quarter of 2020, but the huge impact of the current epidemic outside the country on the world economy continued to develop and evolve, and external risks and challenges increased significantly. Against the backdrop of pressure on domestic economic recovery and increased uncertainty in the world economy, China's stable economic operation still faced more challenges, with consumption, investment and other major indicators lower than the level of the same period of the previous year; affected by the domestic macro-economy still in the downward range, demand for the office market in the major business districts of the country's key cities declined in the quarter, and rents continued to fall on a year-on-year basis. In terms of city grades, office rents in first- and second-tier cities all fell on a year-on-year basis.

1. Changes in office rents

Divided into city grades, office rents in both first- and second-tier cities fell on a year-on-year basis.

By city class, in the second quarter of 2020, 13.9% of the office rents in business districts in first-tier cities increased and 86.1% of the office rents in business districts decreased on a year-on-year basis. Specifically, among the 36 major business districts in first-tier cities, office rents in five business districts, including Beijing Lize Bridge and Beijing Science and Technology Park, rose YoY; office rents in 31 business districts, including Shenzhen Longgang Center City and Shenzhen Nanshan Central District, fell YoY.

In the second quarter of 2020, among the second-tier cities, 6.8% of the office rents in business districts increased, 88.6% of the office rents in business districts decreased, and 4.5% of the office rents in business districts remained the same as in the previous period. among the 44 major business districts in 11 cities, office rents of the major business districts in Hangzhou, Nanjing, and Changsha were mixed on a quarter-on-quarter basis, while office rents of the major business districts of the rest of the cities decreased or stayed flat on a quarter-on-quarter basis. office rents in the major business districts of the remaining cities were either down or flat year-on-year.

2. Business districts with large rent increases and decreases

In the second quarter of 2020, the impact of the Xin Guan Pneumonia epidemic on the office market continued to show, and among the 15 major business districts in key cities monitored by the office rent index of the China Real Estate Index System, the office rents of nearly 90% of the business districts fell on a year-on-year basis; among them, the wholesaler and retailer, accommodation and catering, transportation and sports and entertainment industries were more affected, and enterprises in these industries suffered a greater impact. Among them, the wholesale and retail, accommodation and catering, transportation, culture, sports and entertainment industries were more affected, and the office rents in the business districts where enterprises of these industries are more concentrated dropped more than the previous year. Among the business districts where office rents fell sequentially, Longgang Center City in Shenzhen recorded the largest sequential decline of 3.96%, with rents falling to RMB3.7 per square meter per day; 13 business districts such as Nanshan Central District in Shenzhen and Shangdi in Beijing also recorded sequential declines of more than 3.0%; 47 business districts such as the Guangzhou Sports Center and Wujiaochang in Shanghai recorded sequential declines of between 1.0% and 3.0%; and 47 business districts such as Huaihai Zhong Road in Shanghai and Chunghua Road in Chengdu also recorded sequential declines of more than 1.0% to 3.0%. Huaihai Zhong Road, Chengdu Chunxi Road and other 9 business districts office rent fell within 1.0%.

Despite the restriction of business activities during the epidemic, the Internet-related service industry, medical and big data industries continued to maintain an upward trend, based on the demand for expansion, the demand for office space in emerging business districts with better hardware and facilities, better property management and lower rents has increased. Meanwhile, TMT, finance and other industries remain the mainstay of office market demand, and some enterprises have expansion needs; therefore, office rents in business districts with a high concentration of enterprises in these industries remain relatively stable. Among the 15 major business districts in key cities monitored by the Office Rental Index of China Real Estate Index System, office rents in eight business districts, including Beijing Lize Bridge and Beijing Science and Technology Park, increased year-on-year, with increases of less than 1.0%.

3, rental operation trend research

From the market performance, with the resumption of work and production solid progress, the second quarter of the national economic operation shows recovery and improvement trend, but January to May 2020, investment, consumption, import and export and other major indicators are still declining year-on-year, the economy has not yet been restored to the level of the pre-epidemic, and the stabilization of the recovery of some industries are also facing new challenges. Weak demand for office leasing in key cities and high vacancy rates resulted in a combination of factors that caused office rents to continue to fall in the second quarter on a year-on-year basis. From a sectoral perspective, office demand related to the Internet and healthcare continued to grow against the trend, while office demand in the TMT industry and the financial sector remained stable, bringing some positive impact to the office leasing market.

On the supply side, in terms of new construction, from January to May 2020, the new construction area of office buildings in 15 key cities*** totaled 9.130 million square meters, down 24.6% year-on-year. Among them, the new construction area of office buildings in first-tier cities increased by 6.7% year-on-year; in second-tier cities, it decreased by 39.5% year-on-year. In terms of land supply, from January to June 2020, the planned floor area of commercial office land sold in 15 key cities amounted to 25.095 million square meters, an increase of 14.1% year-on-year. Among them, the planned GFA of commercial office land sold in first-tier cities increased by 100.3% year-on-year; second-tier cities increased by 2.3% year-on-year. In the short term, the area of new office construction in 15 key cities nationwide declined year-on-year due to the impact of the epidemic; in the long term, the supply of commercial land in key cities will continue to grow steadily.

Demand, the second quarter of 2020, China's national economy as a whole is in the process of recovery. 2020 January to May, China's industrial value added above designated size fell 2.8% year-on-year, the service sector production index fell 7.7% year-on-year. From the perspective of major industries, in May, the production index of information transmission, software and information technology services, real estate industry, financial industry increased by 12.9%, 7.1%, 5.2% year-on-year, the growth rate accelerated by 7.7, 6.0, 0.8 percentage points compared with April; wholesale and retail trade, accommodation and catering industry decreased by 2.1%, 21.7% year-on-year, the rate of decline narrowed by 4.5 compared with April respectively, 12.0 percentage points. Overall, the TMT industry and the financial industry remain the mainstay of office market demand this quarter.

Looking ahead, in terms of the macro environment, in the second quarter of 2020, relevant policies to promote the resumption of work and production, and to support the prevention and control of epidemics were implemented in an orderly manner, and the economy continued to show a recovery trend. In terms of taxation, the state has introduced a number of preferential policies on taxes and fees to reduce the tax burden and cost pressure on enterprises and society. on May 15, the Ministry of Finance and the State Administration of Taxation (SAT) jointly issued the "Announcement on the Implementation Period of Tax Policies on Supporting Epidemic Prevention and Control and Guaranteeing Supplies and Other Tax Policies," to support the prevention and control of epidemics, the alleviation of enterprises' difficulties and the resumption of work and production. on May 19, the State Administration of Taxation (SAT) issued the "Announcement on the Matters Related to the Deferral of Income Tax for Small and Micro-profitable Enterprises and Individual Businesses On May 19, the State Administration of Taxation issued the Announcement on Matters Relating to the Deferral of Income Tax Payment for 2020 for Small Micro-profit Enterprises and Individual Business Enterprises to alleviate the pressure on production and operation funds of small micro-profit enterprises and individual business households. In terms of credit support and financial services, the policy continues to give credit support to small and micro enterprises and individual business households. on May 25, the CBIRC, MIIT, NDRC and other six departments jointly issued the Circular on Further Regulating the Charges for Credit Financing and Reducing the Comprehensive Costs of Enterprise Financing, which puts forward 20 measures to further regulate the charges and management of various aspects of credit financing, reduce the comprehensive costs of enterprise financing, and better serve the high-quality development of the real economy. to better serve the high-quality development of the real economy. Since the outbreak of the epidemic, the CBRC has continued to optimize financial services in the field of epidemic prevention and control, and as of May 17, 2020, the credit support provided by banking institutions for the prevention and control of the epidemic and the resumption of work and production has exceeded 3.11 trillion yuan.

In the short term, under the influence of the epidemic, it will take time for China's economy to realize a full recovery. 2020 January to May, the three major demands of consumption, investment and exports are still down year-on-year; with the impact of the epidemic on the market gradually appeared, the short-term rental of office buildings will still be under pressure. But in the long run, although China's current economic operation has not yet returned to the level before the epidemic, but in the epidemic prevention and control has achieved significant strategic results in the background, with the resumption of production solid advancement, the gradual improvement of production demand, China's economic development and transformation and upgrading of the new kinetic energy will continue to develop and grow, all of which will promote the economy to return to normal in a comprehensive manner, and to support the steady development of the office building market.