South China offices embrace non-traditional tenant mixes

Amid persistent supply-demand imbalances, offices across Shenzhen and Guangzhou increasingly integrate non-traditional uses, particularly hospitality, healthcare and education. Beyond absorbing vacant space, this strategy helps stabilise cash flow and improve asset utilisation.

These hotels provide essential, lower-cost accommodation without in-house restaurants, spas or extensive room service. Operators lease multiple floors or entire buildings, absorbing 8,000-24,000 sqm per project.

Three factors are driving this trend:

• Robust demand in core locations from business travel, domestic tourism and price-sensitive stays.
• Healthy investment demand, with individual investors active in hotel acquisitions and lease-up.
• Pressured office rents and elevated vacancies, making well-located office buildings attractive as lower-cost hotel sites.
   

In 2025, hospitality absorbed nearly 240,000 sqm of office space in Shenzhen’s core areas and 90,000 sqm in Guangzhou. This represented around 20% of Grade A office new completions in Shenzhen. Although too small to reshape overall market dynamics, this influx has lifted leasing momentum at the project and submarket levels.

From an asset management perspective, hotels offer large floor-plate absorption and stable lease structures. Amid intense competition, slow absorption and rental pressure, limited-service hotels typically sign 10-15 year leases. These secure long-term income, reduce turnover costs and help landlords weather market volatility. 

Figure 1: New hotel lettings in Shenzhen and Guangzhou office markets

Note: Leased area refers to GFA across Grade A, non-Grade A, and industrial office properties.

Source: JLL

Healthcare and education are also emerging as alternative office uses. High-end medical examination centres, specialist clinics and international schools align well with office buildings. Their large, efficient floor plates and standardised Mechanical, Electrical and Plumbing (MPE) systems make them a strong fit.

However, space requirements vary by occupier type. Large hospitals and international schools usually need multiple floors or entire buildings. Smaller clinics and training centres may only require part of a floor. Larger occupiers also face stricter property and regulatory requirements, so most conversions are case-by-case. Future scalability hinges on clearer policy and more mature retrofit capabilities.

Figure 2: Key hardware requirements for office conversion

Note: * Small-scale medical and educational operators (e.g. specialist clinics and training centres) can typically use existing office buildings’ hardware without dedicated retrofitting.

Source: JLL

Greater local-government flexibility is improving conversion feasibility. In early 2026, for example, Shenzhen introduced rules allowing commercial, office and hospitality buildings to be converted into hotel, education and healthcare uses, subject to approval. Meanwhile, some urban renewal projects have also reduced office space and added residential use to ease future supply pressure.

A more supportive policy backdrop is already encouraging market activity. More landlords are exploring hotel conversions and other non-traditional uses. Interest from non-local investors has also picked up. In Shenzhen’s core areas, over 70,000 sqm of hotel leasing transactions were completed by YTD 2026. Further sizeable volumes are expected over the rest of the year.

In the near term, leasing to non-traditional uses offers immediate benefits. It absorbs large vacancies and generates rental income. This provides a stabilising cash-flow bridge while the office market remains under pressure.