China’s love for megatowers has hit another high.
For the ninth year running, China topped the world last year for the largest number of new skyscrapers 656 feet tall (200 meters) or taller.
A record 84 high-rises were completed in the country out of 128 globally, according to a report by the U.S.-based Council on Tall Buildings and Urban Habitat, which conferred the top ranking on China. Hundreds more are in China’s pipeline for the coming years, with the 1,965-foot Ping An Finance Centre in Shenzhen poised to become the second tallest in the country if finished as planned this year (Shanghai Tower in China’s business capital is the tallest.).
By comparison, seven skyscrapers of comparable height were built last year in the U.S.
Once seen as a sign of China’s progress, the soaring supply of skyscrapers is becoming a symbol of the slowing Chinese economy. Overall office vacancy rates are inching higher as demand wanes from domestic companies facing higher costs and multinational firms cutting back expansion plans.
In China, companies have generally been slow to lease, renting 25% less overall office space over the first three quarters of 2016 compared with a year earlier, due to worries about economic growth and the flight of peer-to-peer lending firms after a regulatory crackdown, according to real-estate broker CBRE Group. The 121-story Shanghai Tower is a prominent example of struggles with leasing.
So why hasn’t momentum slowed?
Partly, it is because local governments in China, hoping to meet economic-growth targets, have a strong incentive to sell long-term leases to developers, who in turn may seek quick returns by building as much rentable space as possible per land parcel, says Daniel Safarik, China director for the Council on Tall Buildings.
“There is also a strong incentive for leaders of large cities to show economic progress in even more tangible ways, such as building the skyline,” Mr. Safarik said.
Developers were particularly aggressive in Shenzhen, a tech hub where 11 high-rises 656 feet or taller were built last year, more than in any country besides China. Four towers of similar height were built in New York City last year.
Office-leasing troubles are starting to surface in the city, according to a third-quarter report from real estate broker Savills. The huge supply delayed some office-project launches, the broker said. Meanwhile, the overall amount of available space that was leased in the third quarter fell 35% from the previous quarter.
The city-wide vacancy rose to 9.9%, compared with the 9.2% average for China’s four first-tier cities, which include Shenzhen. CBRE said in a report that the rate may climb further with more buildings being completed over the next six months.
Office demand has been even more slack in second-tier cities, typically including provincial capitals and other large municipalities. The office vacancy rate for them collectively was 28.3% in the third quarter, CBRE said. In Chongqing, a fast-growing city in central China, the city-wide office vacancy rate was 43% at the end of the third quarter.
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