Savills Q2/2012 Shenzhen Overview

Shenzhen Grade A office market

n  No new strata-title or leasing projects were launched onto the market in the second quarter.

n  Absorption dropped significantly in the second quarter; however, with no new supply, city-wide vacancy rates fell by 0.1 percentage points (ppts) to 12.8%

n  Rents rose by 0.5% quarter-on-quarter (QoQ) to an average of RMB189.9 per sq m per month, up 6.6% year-on-year (YoY).

n  Strata-title transaction prices fell for the third consecutive quarter, reaching an average of RMB48, 111 per sq m in Q2/2012, down 5.1% QoQ.

n  With stable rents and decreasing prices, gross strata-title yields increased by 25 basis points (bps) in the second quarter to approximate 4.8%.

Shenzhen high-end residential leasing market

n  Serviced-apartment rents kept flat at an average of RMB203.6 per sq m per month, while the city-wide occupancy rate increased by 0.3 ppt to 83.6%.

n  High-end villa rents increased by 1.0% QoQ to an average of RMB165.0 per sq m per month, while the city-wide occupancy rate decreased by 1.0 ppts to 89.6%.

n  High-end strata-title apartment rents dropped by 1.8% QoQ to an average of RMB98.8 per sq m per month, while the city-wide occupancy rate decreased by 1.4 of a ppt to 86.3%.

Shenzhen mass residential sales market

n  First-hand transaction prices rose by 4.9% QoQ to an average of RMB18,072 per sq m, while transaction volume picked up a significant rise of 65.9% to a total of 982,000 sq m.

n  Second-hand transaction volume more than doubled in the second quarter, representing as a 115.1% QoQ growth to 1,160,000 sq m,

Shenzhen high-end retail market

n  Shenzhen’s consumer price index (CPI) rose a little since the beginning of the year, representing as a 3.1%’s growth YoY in May

n  No projects were handed over in the second quarter

n  First-floor shopping mall rents in prime areas grew by 0.3% QoQ to an average of RMB1,072.4 per sq m per month, up 2.9% YoY.

n  International fast fashion brand ZARA opened its new store in Costal City, Nanshan District in May. This store was the fifth one in Shenzhen, occupied a total area of 1,445, and it is ZARA’s second “new concept” store nation-wide

General outlook

n  Eight new Grade A office projects are expected to be handed over in the second half of 2012. bringing the market with a total of 470,000 sq m of supply.

n  The city-wide vacancy rate is expected to rise in the second half of the year with the new supply.

n  With stable demand, both rents and occupancy rates in the high-end residential leasing market are expected to remain healthy.

n  Five new prime shopping malls, with a total supply of 600,000 sq m, are expected to be handed over in the second half of 2012, when the city-wide stock is estimated to be pushed up by 40%.

n  PBC(People’s bank of China) consecutively cut the RRR(required reserve ratio) and prime interest rate in the second quarter, as the central government pledged to support the end-users’ demand, and the mass-residential market showed a sign of thaw in 2Q, it is expected that the mass-residential market would outperformed that in the first half of the year.

Information provided by: Savills Research & Consultancy