Bloomberg Anywhere Remote Login Bloomberg Terminal Request a Demo

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Soho China Sees Oversupply of Second-Tier Cities’ Offices

Aug. 21 (Bloomberg) -- China’s second-tier cities have an oversupply of offices as companies halt expansion amid a slowdown in the world’s second-biggest economy, according to one of the country’s biggest commercial builders.

“There are a lot of empty buildings,” Zhang Xin, chief executive officer of Soho China Ltd., said in an interview with Bloomberg Television today. “Concentrating in cities like Beijing and Shanghai is less risky, but when we go to second and third cities the demand instantly reduces.”

China’s economic expansion slowed to 7.5 percent in the second quarter, extending the longest streak of sub-8 percent growth in at least two decades. Soho China is the biggest developer in Beijing’s central business district, where office rents fell in the second quarter, the first decline in almost four years, according to property broker Knight Frank LLP.

“Companies are not paying as much to rent to expand,” said Zhang, who co-founded the company with husband and Chairman Pan Shiyi. “The slowdown is inevitable and is already happening.”

Zhang last year steered Soho China toward what it called a “build-and-hold” model from a “build-and-sell” model to take advantage of more stable and predictable rental income rather than sales proceeds.

The company said yesterday that first-half underlying profit more than doubled as it booked higher earnings from property sales, mostly from those made the year earlier.

As it moves to the new business strategy, Soho China will hold most of the unsold properties under development as self-owned investment properties and will also finish selling the “leftover” properties that were put on the market before it changed the business model, it said.

Soho China shares rose 2.2 percent to HK$6.56 at the close of trading in Hong Kong today. The stock has gained 5.5 percent this year, compared with the Hang Seng Index’s 3.7 percent loss.

To contact the reporter on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.