Market demand still faces challenges

• The overall demand observed a further dip under the current cautious consumer environment. Despite this, the F&B and ACG-related sectors showed relatively thriving momentum in the beginning months of 2025, accounting for 43.1% of the total new store openings in Beijing.
• Tenant turnover has occurred in some projects, yet landlords have responded swiftly by refining tenant profiles, prioritising occupancy and maintaining overall project performance.

Supply moderates and vacancy rates see a minor uptick

• Supply-side pressure has eased, with only 50,000 sqm of new projects entering the market in the quarter. The moderate supply growth has not materially impacted inventory absorption, as citywide vacancy rates have remained stable with minor fluctuations.
• Despite demand-side headwinds, landlords mitigated vacancy increases through flexible leasing strategies and rent concessions, limiting the Urban vacancy rate rise to a marginal 0.4 ppts q-o-q, reaching 5.6%.

Price-for-volume strategies become more common, accelerating rent declines

• Following a decline in market demand that exerted downward pressure on rents, landlords have reduced rents and offered tailored lease terms to secure retailers from a limited tenant pool.
• These volume-driven rent strategies have become a common practice in the current market dynamics. Consequently, urban rents registered a 2.0% q-o-q decrease, marking the most pronounced quarterly contraction since Q1 2021.

Outlook: Policy stimulus and rent realignment to drive market resilience

• The government has planned to allocate RMB 300 billion in long-term special treasury bonds for consumption stimulus, doubling the 2024 fiscal commitment, which is expected to stimulate the revitalisation of the consumer market and leverage a recovery in leasing demand.
• Landlords will persist in providing attractive leasing strategies to cater to potential tenants, as policy requires time to effectively impact the market. Rents are expected to remain on a downward trend throughout the year, with urban rents predicted to fall 7% y-o-y.