(Yicai Global) July 11 -- The cost of renting Grade A office space in Shenzhen fell in the first half of the year to the lowest since 2013 as supply outstripped strong demand, according to a new report by US real estate services provider Cushman & Wakefield.

The monthly price of renting a top-tier office building in Shenzhen dropped to an average of CNY197.50 (USD27.33) per square meter in the six months ended June 30, down 3 percent from the previous half and down 28.6 percent from a record high set years ago, the report showed.

Demand has failed to keep up with supply, leading to an overall upward vacancy rate and forcing new owners to adopt more aggressive pricing strategies to attract tenants, according to Cushman. Properties also tend to retain tenants with expiring leases by offering favorable pricing and commercial terms, which are the main reasons for falling rents.

Shenzhen will see a high supply of new Grade A office buildings this year, with a total area of nearly one million sqm, said Zhang Xiaoduan, head of business development services for South and Central China at Cushman. Given the weak foundation for China's economic recovery, Shenzhen's high-end market will likely remain favorable for tenants in the second half, she added.

The vacancy rate of Shenzhen’s Grade A office space climbed to 25 percent at the end of June from 22.9 percent at the end of last year, Cushman data showed. Net leased space surged 38 percent to a total of 229,000 sqm in the first half from a year ago, while new supply reached 457,000 sqm after the launch of four new projects.

The financial and the professional services sectors were the main sources of demand for Shenzhen's Grade A offices in the first six months of this year, accounting for 41 percent and 14.9 percent of the leased area, respectively, according to the report.

New demand mainly came from traditional sectors, including securities, insurance, and law firms, and emerging service sector businesses such as those in private banking, overseas study, and visas. Demand from the technology, media, and telecom industries continued to fall from last year.

After cross-border personnel flows resumed, foreign-funded companies’ activity in Shenzhen's Grade A office rentals market rose. Such firms rented 26.3 percent of top-tier office space in the first half, up from 16.7 percent last year, with firms based in Hong Kong, Macao, and Taiwan accounting for 14.4 percent of new leases.

Editors: Tang Shihua, Martin Kadiev