More new office supply expected beyond traditional submarkets in Beijing

October 23, 2012 / By  

Whilst discussing the Beijing Grade A office market with a client last week, I was asked a question that is often raised about Beijing. “What about decentralised areas?” Huge rental increases over the past couple of years and increasingly limited vacant space have meant that tenants have been looking beyond traditional business districts in order to meet their space and budgetary requirements.

In our reporting of the Beijing office market, we do not currently make the distinction between ‘core’ and ‘decentralised’ areas. Six major submarkets are home to the vast majority of Beijing’s office stock and we refer to projects located outside of these clusters as being in ‘other’ areas. Our reporting of the overall Beijing market in terms of both financial and physical indicators is inclusive of projects located in all of the established submarkets as well as those in ‘other’ areas.

Rather than being randomly scattered around the city, stock in ‘other’ areas mostly comprises small agglomerations of office buildings that have emerged in Wangjing and Olympic Park. Around 163,000 sqm and 298,000 sqm of Grade A office space can currently be found in these locations respectively along with a number of Grade B projects. All future Grade A supply in ‘other’ areas between now and 2016 will be located in either Wangjing or Olympic Park and it is likely that both of these locales will become submarkets in their own right in the near future.

Ambitious plans are also afoot in other areas of the city. Local authorities in Daxing and Lize, in the south-west of the city, plan to construct large office developments and tap into the strong demand that has been witnessed in Beijing in recent years. In the east of the city, the blueprint for Tongzhou New Town details plans to transform the area into a centre for business and leisure and a significant portion of the area earmarked for development in Dongba will be turned into office space. Plans for many of these decentralised areas are still vague and, in some cases, no clear time frame has been put forward, so it seems highly unlikely that huge developments such as these could be fully realised in the near term. Also unclear is how much of the constructed office space will be Grade A and what portion will be sold strata-title.

The current market situation has forced some firms to explore options beyond well-established submarkets. However, a number of projects in the core CBD extension area are expected to be completed from 2017 onwards and plans to extend Finance Street to the east, west and south will also take effect in the medium to long-term. Thus, with more options in traditional submarkets, developers may find it difficult to tempt firms to move to unproven areas.

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