The Beijing Grade A office market faced headwinds in 2023, with net absorption declining 18% y-o-y as market confidence remained muted. However, a closer look reveals resilient pockets of stability and emerging signs of recovery.

The differentiation in leased areas among industries became more pronounced in 2023. While the finance and TMT industries, traditional mainstays of the Beijing market, exhibited a slight negative growth trend. The professional services and life sciences segments demonstrated resilience.

Figure 1: Leased area in Beijing Grade A office by top 5 industry  (2023 VS 2022)

Source: JLL Research, 1Q24

• The finance industry adopted strategies of risk control and cost reduction in 2023 due to economic uncertainty. This led to a 2% contraction in the overall leased office footprint over the past year. Additionally, the Finance Street submarket, which has over 30% of the total Grade A office finance tenants in the city, saw an increase in vacancy rates in 2023. In contrast, the Lize submarket, which has the lowest rents among all Grade A submarkets, became one of the most favoured locations for finance companies.
• The office leasing preferences of the TMT industry continued to follow a cyclical pattern between Grade A office buildings and business parks. The slowdown in the overall growth of the sector, and companies relocating from Grade A offices to their own campuses and business parks, had a long impact on the TMT industry’s demand. As a result, the leased area of the TMT industry in Grade A buildings across the city saw a slight 3% decline.
• The professional services sector experienced a 2% increase in the overall leased area. This was due to domestic law firms and intellectual property companies registering growth and bucking the overall weak demand trend in the market.
• The life sciences industry had the highest growth rate in leased areas in the Grade A Office market from 2015 to 2022. This growth continued in 2023 with a 6% y-o-y increase. Given the broader environment of the COVID-19 pandemic over the past few years, the life sciences industry has found opportunities for business growth and maintained an upward momentum in 2023. As a result, the life science industry has gradually emerged as one of the sectors that is receiving increased attention in the Beijing Grade A office market.
• The expansion trend of manufacturing industry tenants continued with 11% y-o-y growth in 2023, with leased office space growth ranking first among the top five industries. Established manufacturing hubs in Beijing, such as the Third Embassy Area, have witnessed this sectoral growth.

Currently, the industry structure of the leasing demand in Beijing’s Grade A office market is relatively stable and is not expected to undergo significant fluctuations in the short to medium term. While overall market momentum has not yet fully recovered, the increase in demand and leasing inquiries from certain sub-sectors have effectively boosted market confidence. Focusing on industry-specific drivers and the demand of thriving sub-sectors can help the Beijing office market regain its vitality as the broader economy stabilises and recovers.

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