The central business district of Guangzhou in Guangdong province. A report indicated that the vacancy rate in prime office buildings in the city increased to 20.4 percent in the first quarter. [Photo / China Daily]

Prime office buildings in Guangzhou, the capital city of Guangdong province, have not been selling well and rent costs, despite the vacancy rate, remained high in the first quarter of the year.

A report on Wednesday blamed that situation partly on foreign corporations' slower expansion.

The report, conducted by the global real estate consultancy Colliers International, indicated that the vacancy rate in prime office buildings in the southern city increased to 20.4 percent in the first quarter.

The rate has remained high in recent years as more office buildings have been built in the city's Zhujiang New Town, a booming central business district along the northern bank of the Pearl River, said Bryan Chan, director of the research and advisory department of Colliers International (Guangzhou).

In the first quarter, about 850,000 square meters of office buildings were on the market in the city, of which about 184,000 sq m had been newly added, the report said.

Despite the high vacancy rate, rentals and sales of office buildings both became more common in the first quarter.

"Developers remain confident because of a potential strong demand from domestic businesses in the near future," Chan said.

The cost of renting prime office space increased by 1.9 percent quarterly to reach 161 yuan ($25.5) a square meter a month in the first quarter, while the price of buying office space increased by 2.6 percent to hit 31,280 yuan a square meter.

One large cause of the high vacancy rate has been the city's oversupply of office space. Another has been foreign corporations' slow expansion, which has been driven by the slowdown in the global economy, Chan said.

"Most of the prime office buildings were rented or sold to domestic businesses such as financial organizations, manufacturing and cultural corporations and information technology industries," Chan said.

Sources with local industrial and commercial authorities said 227 new foreign-funded companies settled in the city in the first quarter.

Of all Chinese cities, Guangzhou had the highest rate of vacancy for office buildings in the first quarter.

During the same period, the vacancy rate for office buildings hit 5.8 percent in Hong Kong, 3.5 percent in Beijing and 12.6 percent in Shanghai, sources with Colliers said.

And the vacancy rate is only expected to rise throughout the rest of the year, a result again of oversupply, Chan said.

"After years of planning and construction, there are more high-end office buildings in the Zhujiang New Town to put into operation in the near future," Chan said. "Moreover, other districts, including Haizhu and Yuexiu, have also seen more and more buildings being constructed."

In the Zhujiang New Town, the 103-floor International Finance Center was put into use in 2010 and a number of other high-rises, including the Pearl River Tower and GT Land Plaza (East), are scheduled to begin operating in the second half of the year.

Chan suggested that developers of office buildings provide better services and improve their management to attract more domestic and foreign investors.

qiuquanlin@chinadaily.com.cn