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Savills Research

Office Tianjin – November 2020

Tianjin’s office market continues to recover The Grade A office market saw its very first project launched this year in the third quarter.

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“Tianjin’s economic development continued to recover from COVID-19. A Poly’s new project named Metropolis Ph I entered the Grade A office market in Q3/2020, which stimulated the leasing demand and lifted leasing activities. However, rental indices still saw a downward trend due to fierce competition in the market.” VINCENT LI, SAVILLS RESEARCH

• Metropolis Ph I, developed by Poly and located in Haihe Riverside, was launched onto the Tianjin Grade A office market in Q3/2020, bringing a new supply of 75,000 sq m GFA.

• Total stock of the citywide Grade Office A reached 1.53 million sq m GFA by the end of Q3/2020.

• Leasing demand and activities for Grade A office were both

on the uptrend. The financial, insurance and education sectors accounted for the main proportion of leasing demand.

• The overall vacancy rate inched up by 0.5 of a percentage point (ppt) quarter-on-quarter (QoQ) to 36.6%, though a dip of 0.8 of a ppt year-on-year (YoY).

• The office market’s net absorption in Q3/2020 rose to 39,523 sq m, a significant increase of 186.6% QoQ and 220.4% YoY.

• The office rental index declined 7.3% QoQ and 8.7% YoY, and the average rent dropped to RMB120.7 per sq m per month due to fierce competition.

• Haihe Riverside outperformed this quarter and led net absorption space with 28,913 sq m owing to its well-developed supporting facilities and relatively lower rents.

• In Q4/2020, the Grade A office market will see Taiheng Building located in Haihe Riverside area debut, which will bring 140,000 sq m GFA of new supply to the citywide office market.

Andy CheeGeneral ManagerTianjin+8622 5830 8886andy.chee@savills.com.cn

CENTRAL MANAGEMENT

Please contact us for further information

Savills team

James MacdonaldSenior DirectorChina+8621 6391 6688james.macdonald@savills.com.cn

Vincent LiAssociate DirectorNouthern China+8610 5925 2042vincentx.li@savills.com.cn

RESEARCH

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SUPPLY AND DEMANDDuring Q3/2020, Metropolis Ph I, located in Haihe Riverside, launched onto the Grade A office market, bringing a new supply of 75,000 sq m GFA. Haihe Riverside made up the largest proportion of existing stock, followed by the Nanjing Rd area. The total stock throughout the city reached 1.53 million sq m by the end of Q3/2020.

Given the new project’s exceptional leasing performance, the overall net take-up space hiked up by 186.6% QoQ and 220.4% YoY to 39,523 sq m. Leasing demand from financial, insurance and education sectors saw a steady increase.

The majority of take-up space was concentrated in Haihe Riverside, recording an area of 28,913 sq m thanks to its relatively lower rents and well-developed supporting facilities. Traditional financial sectors were the main driver of leasing deals, and insurance and education sectors reflected an increased leasing demand. Main leasing activities included an insurance company and a real estate company occupying a total space of 4,000 sq m in Maoye Building and Yuanfudao, an education company, took up another 2,500 sq m in MIFC after leasing 8,000 sq m in Q2/2020.

RENTS AND VACANCY RATESWith the pandemic fully contained and the gradual recovery of the domestic economy, leasing activities in Tianjin’s office market were more upbeat, but the overall rents displayed a downward trend. The average rental index decreased 7.3% QoQ and 8.7% YoY, and rents reached RMB120.7 per sq m per month. Citywide vacancy rate inched up only 0.5 of a ppt to 36.6%, a dip of 0.8 of a ppt YoY due to the rising leasing demand

even after the new project with sizeable GFA launched in the quarter.

The Nanjing Road area outperformed with the vacancy rate contracting 0.8 of a ppt QoQ and 10.5 ppts YoY to 15.8%. Landlords adopted flexible leasing strategies to maintain their occupancy rates, pushing rents down. Nanjing Road’s rent was still the highest, standing at RMB131.2 per sq m per month, though its rental index saw the biggest drop of 16% QoQ and 17.4% YoY compared with other submarkets across the city.

Haihe Riverside area saw a moderate performance in Q3/2020. Its vacancy rate edged up 4.5 ppts QoQ to 36.8% due to the new project launched in the precinct. The average rent of this area fell to RMB119.2 per sq m per month, a decline of 5% both QoQ and YoY, due to rental deductions from both the new project and other existing projects in order to accelerate absorption. Another high-end project is expected to launch in the precinct in Q4/2020, which could push the vacancy rate up.

MARKET OUTLOOKThe Grade A office market will welcome a brand-new project in Q4/2020, Taiheng Building in Haihe Riverside area, which will bring 140,000 sq m GFA of new supply to the office market. Tianjin’s office market will continue to see its supply exceed demand in the future as the domestic economy still needs time to fully recover. In addition, landlords will still adopt flexible leasing strategies to lower rental levels to guarantee their occupancy rates and accelerate absorption, hence it is expected to witness decreased rental levels in the citywide office market in the future.

Source Savills Research

GRAPH 1: Supply, Take-up And Vacancy Rates, 2015 to Q3/2020

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Supply (LHS) Take-up (LHS) Vacancy (RHS)

GRAPH 2: Grade A Office Vacancy Rates, Q4/2015 to Q3/2020

Source Savills Research

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GRAPH 3: Grade A Office Rental Indices, Q4/2015 to Q3/2020

Source Savills Research

Source Savills Research

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Office

TABLE 1: Grade A Office New Supply, Q4/2020

PROJECT SPACE (SQ M) SUBMARKET USAGE

Taiheng Building 140,000 Haihe Riverside For Rent