Beijing Grade A Office Market
JLL Research
Third Quarter 2022
3Q22 Market Update
• Demand was tightly constrained by current market conditions.
New Supply Net Absorption Leasing activity dropped off after an uptick at the beginning of
3Q22. Tenants, especially some large-scale companies, tended to
become more cautious about making leasing decisions. In the
quarter, deals under 2,000 sqm accounted for 83% of total
transactions in terms of amount.
• One previously strong demand pillar, the TMT sector, has
0 14,381 witnessed a slowdown in expansions in the past several quarters.
sqm sqm The leasing market in 3Q22 was mainly supported by domestic
financial companies, which contributed half of the leasing
demand.
Rent Vacancy Rate • The downward trend in overall rents continued, with a rent growth
of -0.4% q-o-q. Seven out of the total nine submarkets across the
city reported negative rent growth. To attract tenants, some
landlords became more flexible and provided rent concessions or
longer rent-free periods.
• As the leasing market cooled down in the second half of 3Q22,
￥ 327 9.7% the quarterly net absorption saw a notable decline, recording a
sqm/month 70% q-o-q change. Despite weakening demand across the city,
recent completions in the CBD Core Area continued to fill up,
slowing the downward trend of vacancy rates with a slide of only
0.1 ppts to 9.7%.
*Note: Stock and effective rents on sqm GFA; rent growth rates are chain-linked. 2
Source: JLL, Real Estate Intelligence Service, 3Q22.
Helicopter View of Beijing’s Grade A Office Rents
Seven of the total nine submarkets across the city reported negative rent growth
Olympic Area Wangjing
316 ↑0.1% 235 ↓ 0.7%
Third Embassy Area
Zhongguancun
287 ↓1.2%
369 ↓ 0.3%
Finance Street
615 ↓ 0.1% CBD
East Second 356 ↓0.3%
Ring Road
Overall Rent: 310 ↓ 0.3%
RMB 327 per sqm, per month East Chang’an
284 ↓ 0.8%
↓ 0.4% q-o-q
Lize
↑ 0.5% y-o-y 151 - 0.0%
3
Source: JLL, Real Estate Intelligence Service, 3Q22
Helicopter View of Beijing’s Grade A Office Vacancy Rates
The decline on overall vacancy rate slowed down
Olympic Area Wangjing
12.3% 8.7%
Third Embassy Area
Zhongguancun
9.2%
2.1%
Finance Street
East Second
Ring Road CBD
4.3%
2.4% 10.2%
East Chang’an
Overall Vacancy Rate: 9.7% Lize
8.3%
↓ 0.1 ppts q-o-q
34.0%
↓ 3.0 ppts y-o-y
Source: JLL, Real Estate Intelligence Service, 3Q22 4
Beijing Grade A Office Market
Relocation and expansion from the financial sector served as the main demand source
Total Stock
Submarket Rent* q-o-q chg Vacancy Rate q-o-q chg
(sqm)
Overall 10,847,300 327 ↓ 0.4% 9.7% ↓ 0.1 pp
CBD 2,800,900 356 ↓ 0.3% 10.2% ↓ 0.3 pp
Finance Street 1,794,300 615 ↓ 0.1% 4.3% ↓ 0.4 pp
3rd Embassy 716,200 287 ↓ 1.2% 9.2% ↑ 0.4 pp
East 2nd Ring Rd 896,300 310 ↓ 0.3% 2.4% ↑ 0.0 pp
Zhongguancun 739,900 369 ↓ 0.3% 2.1% ↓ 0.0 pp
East Chang’an 727,900 284 ↓ 0.8% 8.3% ↑ 0.6 pp
Wangjing 963,600 235 ↓ 0.7% 8.7% ↑ 1.2 pp
Olympic Area 1,079,500 316 ↑ 0.1% 12.3% ↓ 1.0 pp
Lize 874,400 151 ↑ 0.0% 34.0% ↓ 0.7 pp Genesis
*Note: Stock and effective rents on sqm GFA; rent growth rates are chain-linked
Source: JLL, Real Estate Intelligence Service , 3Q22
Beijing International Grade A Office Market
Rents saw similar decline at premium buildings
Change Change
Indicator Sub-market Value
(q-o-q) (y-o-y)
Overall 1,538,600 - -
Total Stock CBD 1,336,600 - -
Other 202,000 - -
Overall 8.5% ↓ 0.7 pp ↓ 3.5 pp
Vacancy Rate CBD 8.8% ↓ 0.7 pp ↓ 3.3 pp
Other 6.7% ↓ 0.5 pp ↓ 4.6 pp
Overall 416 ↓ 0.7% ↑ 0.8%
Rent* CBD 399 ↓ 0.6% ↑ 2.4%
Other 529 ↓ 0.9% ↓ 6.1% China World Trade Tower
*Note: Stock and effective rents on sqm GFA; rent growth rates are chain-linked
Source: JLL, Real Estate Intelligence Service , 3Q22
New supply will provide premium options for tenants
Over 150,000 sqm new supply set to enter the market at end-2022, providing sizable choices for tenants
Grade A Completions and New Supply
1,200 Forecast
Gross Floor Area ('000 sqm)
1,000
800
600
400
200 168
280
156
67 124
0
CBD Others
Source: JLL, Real Estate Intelligence Service, 3Q22
Grade A Future Supply
New projects in 2022 set to add pressure on landlords in Zhongguancun and the Third Embassy Area
CBD
400 Wangjing
East Second Ring Road
Third Embassy Area
Zhongguancun
Olympic Area
300
Gross Floor Area (‘000 sqm)
Z3
North Star Centre
200
No.33 Xiaoyun Road
100
Indigo Phase II A
Cinda Centre
King Region Saga
Z4
0
2022* 2023* 2024* 2025* 2026*
Note: We are currently tracking more than 90 future projects. * Status is undetermined
Source: JLL, Real Estate Intelligence Service, 3Q22
Helicopter View of Grade A Recent and Future Supply
A total GFA of 800,000 sqm future supply to enter the market in the next five years
Wangjing
Project Completion
Project Name Date
Olympic Area ID
Zhongguancun
10 1 Taikang Headquarters Building 2021
Sunshine Insurance Financial
2 2021
Centre
3 14 Beijing Investment Group S&T
3 2021
8 Building
9
4 China Great Wall Asset Building 2021
East Second Third Embassy 5 China Insurance Building 2021
11 Area
Ring Road 6 Ping An Fortune Centre 2021
7 Rayzone 2021
Finance Street 21 8 King Region Saga 2022F
12 13
East Changan 9 No.33 Xiaoyun Road 2022F
CBD
10 North Star Centre 2023F
2021 11 Cinda Centre 2023F
4 6
2022 57 12 Z4 2025F
2023 Lize 13 Z3 2026F
2025 14 Indigo Phase II A 2026F
2026
Source: JLL, Real Estate Intelligence Service, 3Q22
9
CBD Core Area attracting attention as prominent location
Projects Z3 and Z4 were under construction in the quarter
2019 2021
Completion Date
2020 2025+ Land
Project Name Completion Year GFA Self-use
Plot
Guanghua Road Z13 China Life Financial Centre 2019 120,000 3,061
Z1b Z14 CP Centre 2019 180,000 18,000
Z1a Tsinghua Z15
CIFCO University CITIC Tower Customs
Z15 CITIC Tower 2019 250,000 187,500
Z14
Art School
CPQS Twin Building Z2b Samsung Tower 2020 100,000 10,000
Towers
Tsinghua University
Z2a Z2b Z1b 2020 116,702 43,218
Sunshine Samsung Art School
East Third Ring Road
Green Space
Insurance Tower Z-14-1
Unsold
Z12 Taikang Headquarters Building 2021 120,000 103,000
Zhenzhi Road
Z2a Sunshine Insurance 2021 90,000 58,000
Z3
Z1a CIFCO 2025+ 45,621 -
Z4 Z12
GLP, CICC,
Minsheng
Z13 GLP, CICC,
Hong Kong Taikang, China Life Z3 2025+ 123,750 -
Land
Bank CITIC etc. Hongkong Land
Green Space Z4 Minsheng Bank 2025+ 67,320 -
Z10
Z5 Z6 Founder, Z11 Z5 Dajia Insurance 2025+ 91,242 -
Dajia Sino-Ocean Dajia, CITIC Unsold
Insurance Land, HSBC etc. Z6 Sino-Ocean Land, HSBC 2025+ 105,000 -
Z8
Z9
CIC, CITIC
Dajia, 预计 40% 面积将为 2025+
2025+
81,600
57,600
-
自用
Zhongfu
Z9 Sino-Ocean Land
Z7 Z8 Dajia,
Building Green Space Z10 Founder, Dajia, CITIC etc. 2025+ 65,000 -
CIC, CITIC Sino-Ocean
Land
Z7 Unsold - - -
Z11 Unsold - - -
Jianguo Road Z14-1 Temporary Power Substation - - -
* For project completion dates after 2025, GFAs based on available information, pending future adjustments.
Source: JLL, Real Estate Intelligence Service, 3Q22 10
Domestic firms strengthen dominant position in market
Space leased by domestic firms grew 5.0 bps y-o-y; the finance and IT sectors were major occupiers
Breakdown by Industry Breakdown by Country of Origin
(Leased Space, GFA) (Leased Space, GFA)
Beijing 36% 14% 10% 7% 33% Beijing 74% 23%
Finance Street 76% 21% Finance Street 96% 4%
East 2nd Ring 19% 10% 67% Zhongguancun 85% 14%
CBD 31% 11% 22% 30% Olympic Park 83% 16%
East Chang'an 36% 7% 19% 23% East 2nd Ring 96% 3%
Olympic Park 21% 27% 12% 35% CBD 59% 36%
3rd Embassy 21% 13% 10% 15% 41% East Chang'an 58% 37%
Zhongguancun 12% 55% 25% 3rd Embassy 55% 41%
Wangjing 14% 24% 33% 22% Wangjing 46% 45%
Finance Internet & Technology China (Mainland) China (Greater) Rest of World
Professional Services Manufacturing
Other
Source: JLL, Real Estate Intelligence Service, 3Q22
Beijing Grade A Supply and Demand Dynamics
Net absorption in the quarter declined 70% from that in 2Q22
1,600
1,400 Forecast
sqm)
1,200
Gross Floor Area ('000
1,000
800 Absorption held
back by supply
600
400
200
0
Leasing Supply Self-use Supply Leasing Net Take-up Self-use Net Take-up
*Future supply is weighted based on probability of delay in individual projects
Source: JLL, Real Estate Intelligence Service, 3Q22
Beijing Grade A Vacancy Outlook: Overall vs CBD
Overall vacancy rate to see a total drop of 3.8 ppts in the next five years
Vacancy rate Stimulus era
50%
Overall
40% CBD
Finance Street
30%
20%
10%
0%
Source: JLL, Real Estate Intelligence Service, 3Q22
Beijing Grade A Rent Outlook: Overall vs CBD
CBD submarket set to see steady growth
RMB/sqm/month
700 Up 238%
600 Up 114%
Up 96%
500
400
300
Overall
200 CBD
Finance Street
100
*Note: Effective rents on GFA, including rent-free period
Source: JLL, Real Estate Intelligence Service, 3Q22
Beijing Grade A Rent Growth Trend
Overall rents recorded slight decline in 3Q22, with the downward trend expected to continue in 2023
60%
Forecast
50% Overall
CBD
40%
Finance Street
30%
Rent Percentage change
20%
10%
0%
- 10% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022* 2023* 2024* 2025* 2026*
- 20%
*Note: Rental changes are on a like-for-like basis
Source: JLL, Real Estate Intelligence Service, 3Q22
Market Outlook
New Supply Vacancy Rate
2022 2022
2023-2026 2023-2026
Overall Rent
2022 Net Absorption
2022 2022
2023-2026 2023-2026
• With the lag effect from the Covid-19 outbreak in May 2022, • The consolidation of several TMT giants in Wangjing since the
we have lowered the outlook on overall rents for the fourth beginning of 2022 has led to the surrendering of some space in
quarter of 2022. Rental value in 2023 is still expected to the area. TMT giants have surrendered a sizable amount of
increase but at a lower growth rate. Approximately 440,000 space scattered throughout the Wangjing area, as the buildings
sqm of future supply will enter the market before end-2023, they purchased or wholly leased in nearby Wangjing become
while net absorption is predicted to improve correspondingly ready for occupancy. We expect this trend to continue in the
to 260,000 sqm. coming quarters and landlords will experience more vacancy
pressures. 16
Source: JLL, Real Estate Intelligence Service, 3Q22
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