As China’s economy showed signs of recovery in the final months of 2020, Beijing’s office market saw a wave of fresh supply and an upsurge in absorption as tech firms led a flurry of leasing demand, according to a report issued by Knight Frank.
About 250,000 square metres (2,690,978 square feet) of new office space entered the market in last year’s fourth quarter, bringing the annual total of new supply to 615,199 square metres, the property consultancy said in its Beijing Grade-A Office Market Report.
The overall vacancy rate edged up 0.9 percentage points from the third quarter to 18.2 percent, while the average rent fell 1.2 percent to RMB 328.70 ($50.91) per square metre per month. Net absorption exceeded 100,000 square metres, or five times the third-quarter figure.
“The office market has shown recovery in leasing demand,” said Regina Yang, director and head of research and consultancy at Knight Frank Shanghai and Beijing. “New demand was mainly from the internet and high-tech sectors.”
The vacancy rate in the high-performing Wangjing-Jiuxianqiao area fell by 5 percentage points from the prior quarter, helped along by e-grocery firm Miss Fresh (which leased 7,600 square metres in the ZGC Financial Building) and online education provider Yuantiku (7,000 square metres at LSH Plaza).
The emerging southeast suburb of Yizhuang also saw expansion demand from e-commerce, hi-tech and pharmaceutical companies, with the submarket’s vacancy rate dropping 5.7 percentage points from the third quarter.
The single largest new lease was inked by investment bank Founder Securities, which took up 20,000 square metres of office space at Zhaotai International Centre AB in East 2nd Ring Road.
Average rent in the East 2nd Ring Road and Lufthansa areas fell by 1.6 percent and 2.1 percent from the third quarter to RMB 302.70 and RMB 315 per square metre per month, respectively.
In the Olympic Games Village area, where new completions in the fourth quarter bolstered competitiveness, average rent rose by 0.9 percent from the prior quarter to RMB 323.6 per square metre per month.
The average rent in the CBD eased 0.4 percent to RMB 358.20 per square metre per month, while rents in the Financial Street area, the Lize business district and Yizhuang remained unchanged at RMB 636.30, RMB 172.4 and RMB 126, respectively.
Ping An, GLP Pick Up Office Assets
The en bloc property sales market continued to attract both domestic and overseas investors in the fourth quarter of 2020, with office buildings and mixed-use developments the main types of transacted assets, Knight Frank said. Urban renovated office projects were still preferred by overseas investors.
On 22 December, Financial Street Holdings announced that, together with its partner China Vanke, it had sold the Financial Street Vanke Fengke Centre in the Zhongguancun area to Ping An Life Insurance at a price of RMB 3.71 billion.
Investment activity continued in the closing days of the year with logistics giant GLP acquiring Block D of the Yingdu Mansion in Zhongguancun for an undisclosed sum. GLP, which announced the deal on its official WeChat account, purchased the 30,000 square metre property from a single-asset REIT managed by Huayuan Group.
Looking forward to 2021, Knight Frank foresees a supply peak in the first quarter as more than 450,000 square metres of new office space is completed, a release that will drive up the vacancy rate, said Demi Zhu, director and head of office services at Knight Frank Beijing.
Completions this quarter will include Taikang Tower in the CBD Zhongfu Plot, the renovated HEXA International Plaza in East 2nd Ring Road, and Ping’an Xingfu Centre in Lize.
Despite the surge of new space, Knight Frank doesn’t see big market shifts on the way. “With the recovery of China’s economy and the increasing market activity, the average rent is expected to remain stable,” Zhu said.