Due to limited incremental demand, landlords continue to focus on stabilising existing tenants

• Leasing activity across the city continued to decline at a moderate pace, with landlords placing greater emphasis on retaining existing tenants within their buildings. Given the weak incremental demand, new leasing transactions were mostly driven by relocations.
• Landlords increasingly prioritised the retention of existing tenants through favourable renewal terms, particularly for projects with persistently high vacancy rates and those facing significant leasing pressure in the near-term.

Overall vacancy rate remains stable in the quarter

• The overall vacancy rate for Grade A leasable office buildings decreased by 0.2 ppt q-o-q to 11.8%, primarily attributed to large-scale leasing transactions in the Wangjing area.
• No new supply has entered the market since the beginning of 2025. As Beijing operated as a stock market, certain projects that entered the market in the past one or two years provided few space options in areas with relatively ageing projects such as Zhongguancun.

Tenants’ rent affordability continues to decline

• Tenants’ expectations for overall rents remained on a downward trajectory, leading to adjustments in the total rents they were willing to bear. Rents have continued their downward trend from previous quarters, decreasing by 3.2% q-o-q and 16.8% y-o-y. 
• From the perspective of buyer composition, domestic investors remained the primary drivers of investment activities, with their investment strategies centred on the safety of asset cash flows and long-term operational value. 

Outlook: A supply peak is expected in 2026

• Approximately 700,000 sqm of new supply is scheduled to enter the market in the CBD and Wangjing areas in 2026. Landlords will make efforts to secure anchor tenants for space destocking.
• Given the limited incremental demand, the overall market is expected to maintain a tenant-favourable environment. Tenants are seeking more advantageous leasing terms and leveraging the low-rent environment to reduce costs while enhancing quality.