New CBDs are emerging in the Greater Bay Area

The Grade A office market in the new CBDs of Guangzhou and Shenzhen benefits from the emerging industries’ need for quality office spaces.

June 14, 2024
Location advantages and world-class business infrastructure made emerging CBDs in Guangzhou and Shenzhen

As a consequence of population growth and changed land-use patterns in large cities, the Greater Bay Area (GBA) has seen the emergence of new central business districts (CBDs). Some examples include Guangzhou International Financial Town (GZIFT) and Pazhou in Guangzhou, as well as Qianhai and Bao’an Central districts in Shenzhen.

These CBDs sit at the edge of the established city centre, which is close to the city business service platforms and manufacturing bases. This proximity gives emerging CBDs the competitive advantage of strong connectivity with potential business partners and key participants in the supply chain. Besides that, new CBDs provide abundant and budget-friendly spaces with developed supporting facilities for entrepreneurs.

Therefore, emerging CBDs in Guangzhou and Shenzhen are becoming hubs for emerging industries, especially the high-end TMT subsectors, including network convergence, IoT, artificial intelligence (AI), and cloud computing. In Pazhou, modern information technology enterprises realised revenue of RMB 65.5 billion in 2023, a 26.1% y-o-y increase. As for Qianhai, it has attracted over 9,000 technology enterprises and 152 R&D centres until March 2024.

Figure 1 - Emerging industries concentrate on the edge of the city centre

Source: JLL

TMT occupiers expanded in the office market in emerging CBDs

Unlike traditional CBDs, the Technology, Media and Telecom (TMT) sector is the major office occupier in Guangzhou’s emerging CBDs (GZIFT and Pazhou), accounting for 40% occupancy in the Grade A office market by the end of the first quarter in 2024. In contrast, the TMT sector only accounts for 10% of occupied space in the traditional CBD (Zhujiang New Town).

Figure 2 - Distribution of Grade A office occupier sectors in Guangzhou CBDs

Note: Data collected by 1Q24
Source: Ruiijian Data

In Shenzhen, there is an obvious difference in occupier structure between traditional and emerging CBDs. The TMT sector takes up around 25% of the leased space in Qianhai, an emerging CBD, which is much higher than the 7% in Futian CBD, a traditional CBD. Although the finance sector still plays an important role in the Qianhai Grade office market, its weight is not comparable to that in Futian CBD.

Figure 3 - Distribution of Grade A office occupier sectors in Shenzhen CBDs

Note: Data collected by 1Q24
Source: Ruiijian Data

Besides, the TMT sector contributed a notable incremental demand in the past quarters. Some occupiers from mobile gaming, AI, and production software subsectors were moving out from non-Grade A buildings and business parks, driven by the upgrading needs. Grade A buildings in emerging CBDs were on the top of their lists given the affordable rental range and higher quality.

As a result, Guangzhou and Shenzhen's Grade A office markets have seen significant contributions from key areas. In the past year, GZIFT and Pazhou absorbed 60% and 25% of the net absorption in Guangzhou, respectively. Similarly, Qianhai contributed 25% of the net absorption in Shenzhen's Grade A office market. Moreover, the TMT sector leased around 40% of large transactions (exceeding 2,000 sqm) in both cities.

Looking ahead, emerging producer service industries are expected to drive incremental leasing demand in Guangzhou and Shenzhen. Therefore, office leasing submarkets closer to business parks hosting many of those companies, which are the emerging CBDs, will likely benefit from this trend as companies seek office space upgrades and expansions.