Beijing Office Rent in China Falls Most Sharply in 4 Years

Office rental prices in Beijing, China, have fallen at the largest rate in four years. This is the result of sluggish real estate investment demand combined with an economic downturn.

On the 27th, Chinese economic media Caixin cited data from Cushman & Wakefield, reporting that the average rent for Grade A office buildings in Beijing in the second quarter of this year was 279.2 yuan per square meter (approximately 52,900 won), down 3.9% from the previous quarter. Caixin explained that the decline in the second quarter was the largest in four years since the second quarter of 2020. During the early spread of COVID-19 in the second quarter of 2020, Beijing office rents fell 5.0% compared to the previous quarter.

The Beijing rental market has been showing weakness since peaking in 2019. Until the second quarter of 2019, rents reached 396.19 yuan per square meter, but have since repeatedly declined, falling 30% over five years.

Cushman & Wakefield explained in their report, "The market continues to see an increase in supply and a downward trend in prices," adding, "Landlords have become more proactive in attracting tenants by offering interior design options and providing subsidies to tenants."

The lack of new demand is also a problem. The net absorption area in Beijing's office market in the second quarter was 45,000 square meters, with the main demand coming from relocations (45.5%) and renewals (25.5%). By tenant type, finance and technology, media & telecommunications accounted for 33.8% and 25.5% of the transaction area, respectively, making them the largest sectors.

The vacancy rate for Beijing offices recorded 18%, down 0.3 percentage points from the previous month, but this still remains close to a high level. Among the key commercial districts recently, Zhongguancun has seen the fastest increase in vacancies. The office vacancy rate in this area was only 1.2% at the end of 2019 but expanded to 12.6% in the second quarter of this year.