January 16, 2019, Hangzhou - The new supply of Grade A office buildings in Hangzhou hit the second highest level in history in 2018, and market demand has shown further diversification in the past year.

Xin Yi, general manager of JLL Hangzhou Branch, said: “Although the rental growth rate is affected by demand and has narrowed in the short term, the good appreciation potential of emerging business districts has attracted investors to continue to pay attention to Hangzhou’s high-quality office market and bulk property investment market.

Still active. "There are many highlights in the new supply in non-core business districts in the high-quality retail market.

With the development of subways and urban infrastructure and the steady development of various regional business districts, Hangzhou's commercial real estate has entered a new era of flourishing, especially the gradual emergence of high-quality and characteristic small-scale businesses.

In the future, more community-focused supporting commercial projects will be launched, boosting the demand structure for a more life-like experience.

Leasing demand in the office building market is picking up and showing diversification.

After experiencing a sluggish third quarter, demand for Hangzhou’s Grade A office building market picked up in the fourth quarter of 2018.

But overall, the pace of depuration in the second half of the year is still slower than that in the first half.

The absorption of Grade A office buildings in this quarter mainly comes from higher-quality office building projects in Wulin and Qianjiang New Town. Qianjiang New Town attracts large state-owned enterprises to settle in due to its river view advantages and property quality.

The demand from technology companies is active, and many large Internet companies have expanded their leases, with the leased area exceeding that of the financial services industry.

Major well-known co-working brands continue to deploy in Hangzhou, especially in the core areas of traditional business districts, and developers are also getting involved in the co-working field in a more flexible way.

Over 300,000 new supplies entered the market throughout the year, and the vacancy rate fell slightly.

In the fourth quarter of 2018, Buildings A and B of Huanglong Vanke Center Phase II in Huanglong Business District and Junhao Center in Qianjiang New Town were officially completed and launched into the market.

Among them, Huanglong Vanke Center is the first time that Huanglong Business District has received new supply since 2015. The project has good pre-leasing performance.

However, due to the high level of new supply for three consecutive years, the vacancy rate in Hangzhou's Grade A office market rose slightly by 0.8 percentage points year-on-year to 25.4%.

New supply restrained rental growth, and the investment market concentrated on transactions at the end of the year.

Starting from the second half of 2018, the continued new supply and slowdown in absorption have led to insufficient motivation for rent increases.

In 2018, the rent in the Grade A office market only increased by 1.6% year-on-year, recording 4.7 yuan/square meter/day.

Driven by the steady development of Hangzhou's Grade A office building market in the past two years, the bullish rental income and the city's energy-level development, the investment market atmosphere is still relatively active.

Two whole-building transactions were recorded this quarter, both of which are located in emerging business districts. They have won the favor of investors for their regional development potential and project value-added space.

Outlook for the office market in 2019: The new supply of Grade A offices in Hangzhou in 2019 will be less than in 2018, and new delivery projects in traditional core business districts will bring new vitality to the market.

Overall absorption is expected to remain stable, in line with new supply.

You Peirong, Director of JLL Hangzhou Commercial Real Estate Department, said: "The demand for Hangzhou's Grade A office building market will continue to benefit from the city's innovative vitality and the expansion needs of technology companies. In the next year, we will face a more complex and changeable environment.

Market environment: Grade A office rents in Hangzhou are expected to remain stable, and the long-term upward trend remains unchanged. "Retail market This year, the high-quality retail market in Hangzhou's main urban area has welcomed the opening of 7 projects, totaling approximately 450,000 square meters.

Thanks to the commercial operation experience and innovation capabilities of developers, such as Huanglong Vanke Center K-Lab and Ping An Financial Center Yuefang, the opening rates of most newly opened projects have been satisfactory.

Judging from the project distribution, new supply is concentrated in the north city business district, accounting for two-thirds of the city's supply.

The vacancy rate of high-quality retail projects in the city remained stable, slightly decreasing by 0.2 percentage points year-on-year to 7.5%.

Stable demand drives rents to rise steadily.

The positive adjustment of high-quality project formats in the core business district and the low vacancy rate of 4.7% supported the rent increase of 4.6% year-on-year.

In non-core areas, stable demand and good performance of new projects have kept rental levels rising slightly.

The effective net rent on the first floor of high-quality retail projects in the city was 20.9 yuan/square meter/day, a year-on-year increase of 3.6%.

Technology support, business formats and carrier upgrades.

In terms of business formats, demand from lifestyle services and leisure and entertainment merchants is strong, with leasing area accounting for 32% of newly opened merchants, including the country's first offline physical stores such as NetEase Kaola, Tmall International, Taobao Xinxuan, and NetEase Yanxuan.

Catering, retail and children's entertainment maintain stable demand.

Well-known brands such as Zhiweiguan and Manji Desserts have shortened consumer waiting time, reduced labor costs, and greatly improved operational efficiency and square footage through hardware transformation and the introduction of artificial intelligence.

The success of technology application has sustained the brand's expansion needs.

In addition, the demand for leasing new energy vehicle brands has increased, and consumers have shown strong interest in such display spaces with cutting-edge technology attributes and a strong sense of science and technology.

In terms of carriers, thanks to the increasingly mature technologies such as the mobile Internet, Internet of Things, and big data, more and more shopping malls are driven by technology to realize digital and intelligent management of on-site merchants; online and offline customer flows are transformed into each other, and multi-scenario

Goals such as efficient member operation and precise positioning.