Companies keen to pay for prime CBD locations

Second-tier cities struggle to find office tenants

The 24-story Seaside Building on Lujiang Avenue in Xiamen's downtown area is attracting few tenants. A total of 10 floors are unoccupied, with four still being completed.

Although the premium office market is in full sway in big cities, second-tier cities in East China registered a high vacancy rate in the first half of this year, according to a report released by Colliers International, a commercial real estate service company.

Xiamen, in Fujian province, had the highest vacancy rate, at 24.1 percent, out of all the cities tracked during the period.

Second-tier cities Suzhou, Hangzhou, Nanjing, Xiamen and Wuhan saw new office buildings go up in the first half of 2014.

But leasing activity slowed in the five cities, while demand continued to be active for high-quality office space with mature business environments.

In several cities, the over-all vacancy rate masked dramatic differences between established areas and emerging ones.

In Xiamen, these figures were 13.9 percent for downtown, such as Lujiang Avenue, and 44.9 percent in Guanyin Mountain.

Offices in the second phase of the International Business Operation Center in Guanyin Mountain had been completed only one month earlier.

One property security guard said offices in the three buildings were rented out three years ago, but no one had moved in.

"The average price for the first phase of the project was 70yuan ($11) to 80yuan per square meter," said a sales manager surnamed Huang.

Hangzhou's average rent remained the highest among the five cities, at 4.7 yuan per square meter per day by the end of the first half of the year, while Xiamen was 1.7 yuan per square meter per day.

"Both domestic and foreign institutional investors remain cautious in light of a huge amount of new supply and the downward pressure on rents in these cities," the report said.

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