Q1 2021 Q1 Leasing market recovers more quickly M B eijing Grade-A Office arket Report
knightfrank.com.cn BEiJING GRADE-A OFFICE MARKET REPORT Q1 2021
OVERVIEW AND OUTLOOK In the first quarter of 2021 (Q1 2021), the tripled that in 2020. The average Grade-A Amongst, more than 400,000-sqm new office market recovered more quickly office rent continued its downward trend, office space will be completed in the with increasing leasing activity. The fell by 0.6% QoQ to RMB326.6 per sqm second quarter (Q2), thus the vacancy average vacancy rate decreased by 1.8 per month. Looking forward to 2021, it is rate is expected to rise slightly, and the percentage points QoQ to 16.4% and the expected that a total of 1.2 million sqm rebound of office rents are facing certain net absorption reached 209,000 sqm, of new office space will be completed. resistance.
FIGURE1: Beijing Grade-A office market indicators[1]
2021 q1 2021 Q1 2021 q1 New supply Rent Vacancy rate - 326.6 16.4% sqm RMB/sqm/month
pps QoQ change: QoQ change: 0.6% QoQ change: 1.8
Q2 2021: Q2 2021: Q2 2021:
Source: Knight Frank Research [1] Rent refers to average effective rent
FIGURE 2: Beijing office development pipeline, 2021-2023 onwards
'000 sqm CBD
1,500 Lufthansa
Financial Street
1,000 East 2nd Ring Road
Zhongguancun
500 OGV
Wangjing-Jiuxianqiao
0 Lize 2021 2022 2023 onwards Others
Source: Knight Frank Research
2 BEiJING GRADE-A OFFICE MARKET REPORT Q1 2021
SUPPLY AND DEMAND In Q1, there was no new office space in Beijing’s Grade-A office market. We expect that a supply FIGURE 3: Grade-A office supply, net absorption and vacancy rate peak will occur since Q2, with the completions '000 sqm New supply (left) Net absorption (left) Vacancy rate (right) of Taikang Tower in CBD Zhongfu Plot, the 1,500 25% renovated project HEXA International Plaza in East 2nd Ring Road, Fairy Land Centre 1,200 20% in Wangjing-Jiuxianqiao area and Ping’an Fortune Centre in Lize area, bringing the new supply in the market to over 400,000-sqm 900 15% office space in Q2. Therefore, it is anticipated that the vacancy rate will be on the rise and 600 10% rents will also face an upward pressure.
300 5% In Q1, the average vacancy rate decreased by 1.8 percentage points QoQ to 16.4% with 0% a total net absorption of Beijing’s Grade-A 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021Q1 office space reaching 209,000 sqm. The office leasing market activity has increased greatly, Source: Knight Frank Research evidenced by downward trends in most business districts. Amongst, with the improved 3.5 percentage points QoQ respectively. occupier; the leasing demand in Wangjing- net absorption of office space in East 2nd Ring In terms of leasing transactions, the East Jiuxianqiao area was still dominated by the Road and Wangjing-Jiuxianqiao areas, the 2nd Ring Road area recorded a large-scale Internet and hi-tech sectors. vacancy rates of both areas dropped by 2.2 and lease secured by professional services
RENTS In Q1, the average rent of Beijing’s Grade-A office market felt slightly by 0.6% QoQ to FIGURE 4: Grade-A office rental trend RMB326.6 per sqm per month, with the rental RMB/sqm/month decline narrowing down by 0.6 percentage 450 point compared to Q4 2020. The decline of 400 average Grade-A office rent has slowed down. 350 300 With the recovery of Beijing’s office market, 250 the average rent in CBD area started to pick up, 200 showing an increase of 0.2% QoQ to RMB358.9 150 per sqm per month. 100 50 The average rents of East 2nd Ring Road area 0 and Lufthansa area decreased by 0.8% and Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 0.7% QoQ to RMB300.4 and RMB312.7 per sqm 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 21 per month respectively. The average vacancy Source: Knight Frank Research rate in East 2nd Ring Road decreased by 2.2 percentage points QoQ to 15.9%. With the vacant space being leased gradually, we expect TABLE 1: Major Grade-A office leasing transactions, Q1 2021 that the rent in this area will bounce back. Area Submarket Building Tenant (sqm) Type During the COVID-19 pandemic, the online CBD CITIC Tower Anshu Space 7,400 New Lease services companies have experienced a new CBD China Overseas Plaza CICC 6,000 New Lease wave of business expansion. Thanks to the Zhaotai International East 2nd Ring Road DENTONS 15,000 New Lease strong demand of online services sector, the Centre AB average vacancy rate in Wangjing-Jiuxianqian Wangjing-Jiuxianqiao Vanke Times Wangjing Missfresh 7,600 New Lease area fell by 3.5 percentage points QoQ to 5.8% Source: Knight Frank Research whilst the average rent increased by 0.7% QoQ Note: all transactions are subject to confirmation to RMB236.3 per sqm per month. space being gradually leased out, it is narrow down in the coming quarters. In Q1, both rents in CBD and Wangjing- expected that the average decline rate Jiuxianqiao areas rebounded. With the new of Beijing’s Grade-A office market will
3 BEiJING GRADE-A OFFICE MARKET REPORT Q1 2021
INVESTMENT MARKET In Q1, the office and retail properties in the Beijing. This fund will transform and for a total consideration of RMB13 billion. core area of Beijing have gained popularity upgrade the building in order to promote Located at the southeast corner of the among investors. More investors have kept the development of office market and intersection of Xidawang Road and Jianguo up with the pace of urban renewal and accelerate the urban renewal in Beijing. Road in Chaoyang District, Beijing, the tend to achieve price appreciation through Located in the Tus Park, the building has project is previously known as "Chang'an renovation and upgrading. a total gross floor area of approximately No. 8". In July 2013, the Kwok family 46,330 sqm and is situated adjacent to acquired the project and appointed Kaisa On 7 March, China Jinmao, Beijing Capital Subway Line 13, Line 15 and Line 4. to construct and operate it. After Kaisa’s Development Holdings (BCDH) and debt restructuring, the renovation project GoHigh Fund jointly established the Torch On 25 March, Kaisa announced the "Beijing Kaisa Plaza” was completed in 2017 Fund, subscribed a capital of RMB1.202 acquisition of the Yaohui International with a total GFA of 250,000 sqm, covering billion to acquire Tus Park Tower D, City Tower from the three companies retail stores, serviced apartments, office Zhongguancun East Road, Haidian District, that are controlled by Kwok Ying Shing buildings and residential buildings.
Beijing GRADE-A office market dashboard
Beijing Grade-A office inventory, rents and vacancy rates of major business districts
ZGC OGV Wangjing-Jiuxianqiao , Inventory: 1 080 Inventory: 1,110 Inventory: 1,100 Rents: 357 Rents: 323.9 Rents: 236.3 VR: 4.5% VR: 23.9% VR: 5.8%
Lufthansa Inventory: 870 Rents: 312.7 VR: 14.5% BFS
Inventory: 810 East 2 Ring RD Rents: 634.3 VR: 5.6% Inventory: 1,400 Rents: 300.4 VR: 15.9%
Lize（Emerging） Rents: 175.1 CBD Inventory: 3,300 Rents: 358.9 VR: 15.3%
Grade-A office Fengtai (Emerging) Rents: 144.6 Total Inventory approx. Yizhuang (Emerging) 11.6 Rents: 126 million sqm
Source: Knight Frank Research
Note: unit for market inventory – 1,000 sqm; rents using average effective rent at RMB/sqm/month; VR refers to average vacancy rate.
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Research & Consultancy Beijing Office Services
Laurence Zhu Regina Yang Demi Zhu Senior Director, Director, Head of Research & Consultancy, Director, Head of Office Services, Head of Research & Consultancy,China Shanghai & Beijing Beijing +86 137 6439 9991 +86 21 6032 1728 +86 135 8158 7931 [email protected] [email protected] [email protected]
Martin Wong Amy Cui Director, Analyst, Research & Consultancy, Head of Research & Consultancy, Greater China Beijing +852 2846 7184 +86 10 6113 8039 [email protected] [email protected]
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