APPD Market Report Article


December 1, 2021


RMB 345.5


Leasing activity further progresses from 1H21 recovery

  • In addition to the sizable amount of self-use space that came online, leasable net absorption recorded a notable increase. Following soft demand from COVID-19 in 2020, the market recovery trend observed from the beginning of 2021 continued to strengthen in the quarter.
  • The finance and IT industries served as the main drivers of demand, especially domestic companies. The professional services sector was also active in targeted submarkets, particularly the CBD and East Chang’an.

New projects in CBD Core Area exert limited supply pressure

  • In 3Q21, two new completions – Sunshine Insurance Financial Centre and Taikang Headquarters Building – entered the market via the CBD Core Area. As the majority of space at both projects was designated for self-use, added pressure from the new supply was limited.
  • As recovery demand persisted, destocking occurred at a faster pace, leading the overall vacancy rate to decrease by 1.6 percentage points to 12.7%. Landlords continued to see the sliding vacancy rate as a positive market signal.

Overall market rents decline at a moderately slower pace

  • Overall rents showed a more modest decrease, recording -0.4% q-o-q growth and -5.7% y-o-y growth in 3Q21. Although rents remained in decline across the city, some landlords of stable projects with high occupancy rates leveraged their bargaining power to raise rents in the quarter.
  • In the north of the city, Shangdi was a popular area for IT companies in the quarter, with many buying buildings for self-use. Meanwhile, Mitsubishi Estate invested in Zhongguancun Software Park’s Diamond Building, purchased by ACR Asset Management in May.

Outlook: Window for tenant-favourable leases to close

  • Many tenants are expected to take advantage of some of the last tenant-favourable leasing opportunities in the final months of the year – as overall rents start to flatten out. As more landlords with stable performance become better-positioned to raise rents, the market is projected to see an upward rent trend in 2022.
  • The total net absorption level is expected to fall back slightly in 2022, after rebounding considerably since the start of 2021. However, leasing recovery is still expected to steadily progress as the economic situation improves.

Note: Beijing Office refers to Beijing's overall Grade A office market.

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