21 Feb 2017
Beijing Prime Office Market Report Q4 2016
In the fourth quarter (Q4) of 2016, Beijing’s Grade-A office market witnessed a 0.7-percentage-point increase in the vacancy rate quarter on quarter (Q-o-Q), while the average rent dropped by 0.3% Q-o-Q. In the quarter, leasing demand was underpinned by companies from the finance, insurance, professional services, law and internet sectors. The average sales price of Grade-A office properties declined by 2.0% Q-o-Q. Meanwhile, two en-bloc office investment transactions were recorded in Q4.
In Q4, Beijing’s Grade-A office rents averaged RMB373 per sqm per month, slightly dipping by 0.3% Q-o-Q. Due to abundant new supply in the quarter, the average vacancy rate rose by 0.7 percentage point Q-o-Q to 6.7% (see Table 1).
Three Grade-A office buildings, with 152,000 sqm of new space, were launched in the quarter, provided by Emperor Group Centre in the CBD as well as Radiance and LSH Centre Phase II B in the Wangjing submarket (see Table 1).
Some prime office submarkets witnessed drops in rents as abundant supply boosted competitions. In addition, given the economic uncertainty, tenants became more cautious about their expansion plans, which slowed absorptions in the market.
In Q4, the average sales price of Grade-A offices decreased by 2.0% Q-o-Q to RMB53,276 per sqm (see Table 1).
Three office projects, located in the CBD, East Second Ring Road and Asian-Olympic Area, are scheduled to complete in Q1 2017, providing approximately 225,200 sqm of prime office space.
Sustained supply is expected to further push up the average Grade-A office vacancy rate in Q1 2017. Moreover, affected by the economic slowdown, tenants will become increasingly cost-sensitive and cautious. Moderate declines in the average rent are expected in the short term (see Table 1).
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