A slight rise is expected in 2014
New office space is constantly added in Beijing, three projects were put on the market in the last quarter of 2013 : the Runshi Center in Liangmaqiao, Fortune Plaza III in Beijing CBD, and Ocean International Center II, at the east of Beijing CBD. These three projects alone represent 265,000 sqm, and 6% of this place was rented at prices around 300-400 RMB per square meter per month, which is below market price but is expalined due to the vacancy rate of these new buildings.
This major addition of office space in a short span of time resulted in a rise in the vacancy rate in Beijing, which is still very low though, a little bit over 5%. Compared with the last quarter of 2012, rents of grade-A office dropped by 3,6% at the end of 2013. The situation is unlikely to be the same in 2014, since the expected amount of office space to be added is limited, only 300.000 sqm for the whole year. The basics of the market are still likely to be in favor of a rise, since Beijing is one of the most dynamic office market in the world, the 3rd most costly city in Asia after Tokyo and Shanghai, slighlty more expansive than Shanghai and Singapore. Both Shanghai and Beijing are expected to see a rise in the rents in 2014.
Jones Lang Lasalle agrees that there will be a rise in Beijing Office rents in 2014, in accordance with Knight Frank diagnosis, but stresses that if indeed there will be relatively few new office space available in 2014, a very large number of rents are going to expire in 2014 in Beijing CBD, adding office space available for rend and thus moderating the rise.
Looking at the overall situation office space supply in China, Beijing is among the most mature markets when cities in the south of the country are going to have massive addition of office space. The highest growth in percentage are going to be Chengu, Shenzhen and Guangzhou. Beijing and Hong Kong are the two major cities with the lowest addition of office space in percentage.
Sources :
Knight Frank Commercial Property
Wall Street Journal
Cushman Wakefield 2014 forecast
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