Office demand from IT sub-sectors in China
Gaming, AIGC and online education sub-sectors are expected to lead the expansion of the IT industry in China’s office market in the near future.
In 2023, the IT industry will continue to support office leasing demand in major cities across China. By diving into the development strategy of IT sub-sectors as well as recent policy trends, we expect that AIGC (Artificial Intelligence-Generated Content), gaming, and online education sub-sectors will lead the expansion of the IT industry in China’s office market in the near future.
1. Major boosts for the gaming industry in China
Recently, licences approval has resumed as part of a multi-pronged approach to help the industry rebound. The number of licences for gaming issued in the first three months of 2023 has exceeded 50% of the total for 2022. A gaming data analysis organisation expects the number to cross 1,000 in 2023.
Figure 1: The total number of game licences issued each year
Source: Gamma data
* Predicted value
Recently, major office leasing markets observed a significant increase in demand for office space from the gaming industry. The revitalisation of the gaming industry is expected to generate significant incremental demand for the office market in 2023 and beyond. There are three major boosts for the gaming industry in China:
- Licence approval is now less of a hurdle for the gaming industry, stimulating its growth capacity
- Favourable policies continue to boost market confidence, revitalising the development of the industry
- Technical innovation in the industry will help game developers reduce costs and increase efficiency, accelerating the development of the industry
2. Innovation and policy support accelerate the AIGC industry development
AIGC (Artificial Intelligence-Generated Content) industry is another IT sub-sector with a high potential for expansion. In the past decade, the new registration of artificial intelligence-related enterprises in China increased yearly, achieving nine consecutive years of positive growth. In recent years, China's AIGC industry has seen a substantial increase in recruitment demand, and the scale of manpower in the industry continues to expand.
Figure 2: The volume of artificial intelligence-related enterprise registration over the past ten years
Nowadays, the scale of the workforce and the occupied office space of the AIGC industry is relatively small. However, relying on the strong support of national policies and the rapid expansion of its market size, the AIGC industry will likely become one of the key drivers of new leasing demand in the office market.
3. Business transformation of leading enterprises helps market to regain confidence in online education industry
After the issue of the "double reduction" policy, which is an attempt by China to reduce homework and after-school tutoring pressure on primary and secondary school students, leading online education enterprises have been actively adjusting their strategies and choosing to transform into new businesses.
Recently, several companies that have made significant inroad into vocational education have helped restored confidence in the online education industry. At the beginning of 2023, two vocational education enterprises were successfully listed, with a total market value of around RMB 26 billion (USD 3.6 billion).
From the office leasing market perspective, online education companies have been active again, seeking new office space since late 2022. Online education is expected to bring moderate demand growth for the office leasing markets.