Tenants evacuated from Shenzhen’s swaying SEG Plaza skyscraper demand compensation as investigation into cause continues

He is now working in a temporary office arranged by the government and building owner and has decided not to return to his 100 square-metre office even though he may end up receiving no compensation and losing his two-month deposit of about 20,000 yuan (US$3,136).

He is one of many tenants selling electrical goods in Shenzhen’s fifth-highest tower who are now calling for compensation for business disruption and early termination of their leases at SEG Plaza.

The landmark skyscraper in the city’s famous Huaqiangbei electronics district began swaying for no apparent reason on the afternoon of May 18, leading to the emergency evacuation of thousands of people. It experienced further periodic tremors over the next two days, each lasting a couple of minutes.

In an internal notice to the tenants dated May 20 shared by the official news agency Xinhua, the building owner said no one would be allowed to enter until an investigation was finished, without giving an idea of the time frame.

The SEG Group has banned “all owners, merchants and tenants from entering or leaving the SEG Building and electronics market … [which] will open again after the relevant inspection work is completed”, the statement said.

The measure came into effect last Friday.

Ten days on, there is still no official explanation for the shaking and the tower remains closed.

The Shenzhen Housing and Construction Bureau has commissioned multiple professional institutions to monitor the building since the incident. Tests have found everything to be within official ranges set by China’s safety bodies, according to a statement released on the official WeChat account of the Shenzhen government.

The tenant of a shop measuring 80 square metres would have lost up to 20,000 yuan in wasted rent so far, while a company leasing an office of 100 square metres would be down by about 3,000 yuan, according to the estimates of Fangtianxia, an online property portal.

“If it is defined as force majeure, tenants are entitled to ask for at least half of the rent for the entire shutdown period as both sides are responsible for disruption caused by such issues,” said Liu Ziru, a property lawyer at Dentons in Shenzhen.

“But it is not legitimate to ask for early termination of tenancy if it is a force majeure event, and the tenants may have to bear their own loss if they just surrendered based on the current situation.”

Shenzhen Electronics Group, the owner of SEG Plaza, has not replied to enquiries by the Post regarding compensation and surrendered leases.

It is not just the skyscraper itself that was shaken. People’s confidence has been severely rattled too, raising fears that the iconic building may turn into a ghost tower, with tenants unwilling to return regardless of the outcome of the government‘s investigation.

“It is very likely that the vacancy rate will spike if no clear conclusion can be reached and no satisfactory explanation about the shaking can be given,” said Vincent Cheung, managing director of Vincorn Consulting and Appraisal.

Cheung believes the tower will have to offer sharp discounts to attract new tenants in the future.

“The swaying is not fatal to a property’s valuation as long as the issues are figured out and solutions can be rolled out,” he said.

“But it has a huge impact on the tenant’s confidence. Even if the landlords said that the rent will be cut by half, are people willing to stay? Probably not. It will take a long time and the tower may have to offer extremely attractive rents to lure new tenants.”

Additional reporting by William Zheng