Rising demand creates opportunities for tenant-mix adjustments

• Market demand remained active. Affordable retail brands from the F&B, fashion and lifestyle sectors that generate high-frequency consumption have been actively expanding, bringing new opportunities for tenant-mix adjustments at leading projects.
• The overall active demand has significantly benefited the recently opened projects in the Suburban market, helping to destock vacancies.

Supply-demand landscape remains balanced

• Three new projects totalling 385,000 sqm set a new high for single-quarter supply. This includes two large Suburban projects by Hopson and China Resources, for 367,000 sqm. As a result, the Suburban vacancy rate rose by 1.4 ppts to 7.8%.
• The Suburban market has experienced elevated yet short-term supply pressure due to the record-high quarterly supply. However, the robust demand has allowed the market to remain balanced, and the overall vacancy rate has not been largely affected.

Rents are steadily recovering from a low base

• Leading projects have adjusted their tenant mix and are enhancing their market appeal, driving rent increases. Additionally, the stabilisation of recently opened projects with lower starting rents contributed to rent hikes.
• Urban rents grew 0.9% q-o-q, while Suburban rents rose 1.8%. Despite four consecutive quarters of growth, rent levels in each submarket remain 15% below their pre-pandemic levels, suggesting the market’s recovery is still in the early stages.

Outlook: Active demand to further stimulate a gradual recovery in rents

• Leasing demand improved as leading brands announced expansion plans in 2024. The robust demand is expected to be sufficient to absorb the substantial over 1 million sqm of new supply, 94% of which is in the Suburban market slated for H2 2024.
• Rents are poised for a continued yet moderate recovery in 2024. Urban rents in Beijing are projected to increase by 3.9% y-o-y in 2024. The Core market is expected to increase by 2.3% y-o-y in 2024 and to return to pre-pandemic levels by mid-2025.