A fifth of MNCs in China rethink office space leasing plans amid tough Covid-19 curbs, while 4 in 100 cancel expansion
- More than three-quarters of multinational companies in China said in a JLL survey that their leasing plans were not affected by the pandemic
- Nearly 60 per cent of companies were planning or considering closed-loop work arrangements, but many have also grown more accepting of remote work
Four per cent of multinational companies in China have cancelled their plans to either upgrade or expand their office space there, while nearly a fifth are rethinking whether to forge ahead with their previous plans, according to the latest survey from property consultancy JLL.
“Of MNCs surveyed, 77 per cent said their leasing plans were not affected by the pandemic; 19 per cent will re-evaluate their leasing plans after control measures are lifted,” the report said. “Only 4 per cent have completely cancelled their original expansion or upgrade plans.”
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Before the pandemic, more than half of the respondents had no plans for either upgrading or downsizing their offices, while 24 per cent were looking to expand and 10 per cent were set to upgrade. Meanwhile, 10 per cent of the respondents were planning to downsize.
For MNCs’ five-year plan, 13 per cent said they were likely to downsize, while 24 per cent were not sure. On the other hand, 42 per cent said they were likely to expand, while 21 per cent said plans were unchanged.
The survey was conducted from June 1 to June 18 this year with 150 companies in industries spanning financial services, professional services, technology, media and telecommunications, trading, manufacturing, retail and life science.
The survey period was done after Shanghai lifted the lockdown restrictions that limited the movement of the financial hub’s 25 million residents for two months amid a surge in Covid-19 cases.
Almost all of the survey respondents had an office presence in Shanghai.
More than a third of the respondents, 34 per cent, had their headquarters in the US, followed by a quarter from Europe, and nearly a fifth from Japan. Two per cent of the respondents were based in Hong Kong, while the rest were from other parts of the world and other regions in Asia.
Firms with office space of over 2,000 square metres accounted for 59 per cent of respondents, while the rest had less than 2,000 square metres.
Over a third of respondents were MNCs with over 1,000 employees.
“MNCs have grown more accepting of hybrid accommodations – with a large share of employees working remotely – since China’s most recent wave of the pandemic,” the report said. “More companies are developing comprehensive CRE (commercial real estate) selection strategies with increased attention to strategic factors such as ESG (environmental, social and governance), company branding, talent retention and BCPs (business continuity plans).”
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Meanwhile, 27 per cent of respondents also said they were planning measures for potential closed-loop management with layout plan adjustments such as allowing employees to stay overnight in the office and putting up storage for daily supplies to support employees staying in the office. Nearly a third, or 31 per cent, were also discussing this possibility.
China is just one of a handful of major economies in the world that has retained strict Covid-19 curbs such as routine lockdowns and border closures, a point of irritation for Western nations that have largely done away with pandemic measures.
In the second quarter of the year, the world’s second-largest economy posted 0.4 per cent growth, slower than expected, reflecting the toll of wide-ranging lockdowns in the capital of Beijing and Shanghai, which hammered economic output and likely put the nation’s 5.5 per cent economic expansion target for this year out of reach.
