In China’s hi-tech hub of Shenzhen, a confluence of factors, from over-exuberant behavior by commercial property developers, the U.S.-China trade and tech war, and an exodus of foreign investors, are weighing heavily on what was until recently a booming economy. The city – just over the border to the North of Hong Kong – is uniquely exposed to the multitude of headwinds facing the Chinese economy, given its track record of luring foreign capital as a special economic zone (SEZ), and its status as a hotbed of innovation. Developers are facing huge overcapacity, with the vacancy rate now near a 10-year high. This is just one indicator of weakening economic sentiment in China’s wealthiest per capita city as some businesspeople are struggling with “the toughest year” of their careers.

Cindy Huang, Saleswoman of high-end serviced offices in Shenzhen’s central business district (CBD), said 2019 has been the worst year on record. Lan Liu, Operations Manager of a serviced office firm in the Futian district that is home to Shenzhen’s municipal government, said there has been growing pressure for office landlords in Shenzhen to cut rents this year. “Since last year, it’s been common to see companies downsize their office space and send staff to co-working spaces or to work from home offices. I heard from most of our tenants that their sales have been suffering since last year, and their views on expansion are very conservative. Everyone is in ‘wait-and-see’ mode for the economic future of the city and the country.”

Part of this trend is due to a shift in the way Shenzhen’s tech firms operate. More and more, start-ups and established players prefer co-working spaces, amplifying the characterization of Shenzhen – home to tech companies like DJI, Huawei and ZTE – as “China’s Silicon Valley”. The vacancy situation is most pronounced in the city’s Qianhai area near the border with Hong Kong, which has a vacancy rate of 65.7%. Qianhai had hoped to become one of the largest business districts in China and was positioned by Beijing to be a hub for financial and innovation reform, in a bid to lure international companies and start-ups. In Qianhai and also the Shenzhen Bay area, both of which face South into Hong Kong, the pressure on the commercial property sector will increase, with nearly completed towers due to come online, bringing with them a new supply of office space.

Shenzhen’s high-end office buildings currently occupy 5.53 million square meters, a rise of 19.3% year-on-year, according to Colliers International. The firm estimated that an additional 4.37 million sq m will be added by 2021. Alan Fung, Guangzhou Managing Director at Colliers, said that the vacancy rate for “Grade A” office space in Shenzhen stands at 23%, compared to 13.6% at the end of the second quarter of last year. He blames this on the central authorities’ crackdown on peer-to-peer lenders, as Beijing attempted to get a handle on rising debt outside mainstream financing channels. These companies were previously valuable tenants.

The downturn is not just being felt in the property sector. A yacht broker in Shenzhen said his team of five sales people once sold 26 imported yachts in a single year, some costing millions of U.S. dollars, to wealthy Chinese buyers earlier in the decade. Last year, they sold fewer than 10. Growth in telecommunications equipment, computers and other electronics – Shenzhen’s key sectors – fell to 10.7%, down from 13.7% in 2018, the South China Morning Post reports.