RETAIL RENTS IN BEIJING RISE BY MOST SINCE 2019
Premium office segment still under pressure amid fierce competition among landlords for quality tenants, but outlook is positive, JLL says
Beijing’s commercial property market recovered partially in the first quarter and is gearing up for further stabilisation this year as a strong rebound in consumption and policy support combine to drive demand for leasing and investment, analysts say.
In the retail market, rents in urban Beijing rose by 1.3 per cent quarter on quarter in the three months to March 31, marking the fastest growth in this segment since 2019, according to a report published on Tuesday by property services company JLL.
Rents in the suburban market jumped by 2.8 per cent, also the strongest since 2019, in a rebound to 2021 levels.
While rents were still nowhere near pre-pandemic levels, the outlook was positive, it said.
“The demand surge is expected to continue throughout the year”, as increased leasing activity allowed landlords to upgrade their tenant mix and select “higher-positioned brands” from their pool of active inquirers, said Ji Ming, research director for JLL North China. Since higherend tenants were more willing to pay, they were expected to drive up rents, Ji added.
The retail vacancy rate returned to pre-pandemic levels, down by 0.7 percentage point to 5.2 per cent in urban Beijing and by 0.3 percentage point to 6.4 per cent in the suburban market.
Retail property was also gaining traction on the investment front, JLL said, owing to policy support for consumer infrastructure real estate investment trust (C-Reit) products, which allow the public to invest in incomegenerating projects such as shopping centres and toll roads.
C-Reits are attractive to investors because they are publicly traded and so more liquid than regular property investments. The quality of their underlying assets is another appeal.
The mainland’s 87 billion yuan (HK$94 billion) Reit market is the fourth largest in Asia after Japan, Singapore and Hong Kong. It was expanded last year to include “consumption-related infrastructure projects”, or shopping centres and department stores, boosting options for investors.
In the office segment, rents for premium space continue to drop even though overall activity is picking up. Amid fierce competition among landlords for quality tenants, rents for grade A office buildings in the first quarter declined by 11.4 per cent year on year and by 4.6 per cent from the previous quarter, according to JLL.
Rents for grade A space fell by more than those for grade B buildings for the first time in seven quarters, according to a report by CBRE on Tuesday.
Grade A offices are expected to see rents decline by 7.8 per cent this year, according to JLL.
Yet, office leasing inquiries kept rising and negotiation cycles were “significantly shortened”, JLL said, adding companies in the finance, technology, media and telecommunications sectors generated close to half of the total leasing volume in the grade A market over the past quarter.
“In the short term, competition among landlords for limited demand will put further downward pressure on [rents] for both grade A and grade B office buildings,” said Molly Yuan, CBRE’s North China head of advisory and transaction services.
“This will make the premium office building market ... more appealing compared with their less premium peers, thereby attracting more quality tenants.”
In addition, no new projects would enter the market over the next six months, Yuan said.
At the same time, Beijing’s stimulus measures and funding directives for local start-ups, small and medium-sized enterprises, and hi-tech firms were likely to help shore up confidence for tenants and cut vacancies, she said.