After observing the development of COVID-19 and employment of government control measures, we can see the virus has had a short-lived impact on the office market in first-tier cities. The market is dependent on the policy measures that were introduced by respective governments which include reduction or waive of rental payments for a few months. Apart from the effects of COVID-19 and a slowdown of the macro economy, it is expected that there will be new offices entering the market which could lead to a further increase in first-tier cities’ overall vacancy rates. Nonetheless, the second quarter’s downward pressure in rents will depend on the ease and prevention of COVID-19.

In Beijing, because of COVID-19, some developers have started to delay the launch of some of their projects onto the market, resulting in an alleviation of the overall supply pressure and could delay the emergence of a new supply peak in the short- to medium-term. The Beijing office demand would gradually stabilise if the current epidemic can be brought under control. Supported by foreign financial institutions and professional service sectors, the overall transaction volume of high-quality office buildings could increase while the overall rent adjustment will continue until the epidemic is over. In Shanghai, the vacancy rate of office buildings in Shanghai will continue to increase in the future. In addition to being affected by the macroeconomic environment and being dragged down by the epidemic, new project launches have gradually returned to a normal level and have resumed their upward trend. Amidst the epidemic, the government’s policy support and economic subsidies to tenants are expected to help reduce a large number of defaults and early lease cancellations. In the medium- and long-term, the downward pressure on Shanghai’s office rent is expected to reduce as the Shanghai economy continues to develop. Guangzhou and Shenzhen property markets will be explained in the next column.