Beijing's office rents have increased by 41% in the last year.

According to a new Jones Lang LaSalle research, the rent of Grade A office and warehouse space climbed throughout 2011: Event

Residential - In Beijing, the average rent of serviced apartments climbed by 12.5% year on year. In 2011, the sales area of high-end apartments shrank dramatically, while the average price fell slightly.

Industrial - Strong demand from e-commerce, retail, and 3PL enterprises has resulted in most warehouses being fully leased and rents reaching new highs.

 

a residence

In Beijing, the average serviced apartment rent climbed by 12.5 percent year over year in 2011. The sales area of high-end apartments has shrunk dramatically, while the average price has dropped little.

The average rent for serviced flats in Beijing grew by 12.5 percent in 2011. In 2011, there was no new supply for serviced apartments, and one property was strata-title sold and thus exited the leasing market, reducing total supply to 8,095 units. Furthermore, due to the rehabilitation of some developments, the quantity of available residences on the market has fallen even more. Despite uncertainty and a tumultuous global economy weighing on domestic economic development, leasing demand remained high throughout the year. MNCs continue to see China as a key market, with many expatriate executives and engineers relocating to Beijing in 2011. The fourth quarter is traditionally a slow time for the leasing market, but demand has remained steady, and available accommodation in some places, such as the CBD, Sanlitun, and the Third Embassy area, is scarce. Automobile, medical, energy, and manufacturing companies continued to generate much of the leasing demand. Because of the high demand and limited supply, the vacancy rate fell to 7.2 percent at the end of 2011. Landlords raised rates dramatically, and many tenants found that the available housing was prohibitively expensive. Rents climbed 12.5 percent year on year to RMB 190 per sqm per month in 4Q11 (based on GFA). In 2012, three serviced apartment projects with a total of 580 units are expected to be constructed, helping to alleviate the housing shortage. However, as a result of the lower economic growth estimates for 2012, some MNCs are expected to scale down their expansion in China and limit the number of expatriate personnel to cut expenses. Overall demand will remain consistent in 2012, with the vacancy rate increasing slightly due to new supply, while the average rent will grow by roughly 10%.

As a result of the purchase restriction policy, the transaction area of Beijing high-end apartments fell by 21.4 percent in 2011 to 1.18 million sqm, and average prices fell somewhat. The present Beijing high-end apartment market is dominated by buyers looking to upgrade their living conditions. To meet the strict buying conditions, such buyers must have readily available funds and not rely on bank loans. Due to a slower pace of sales and a more stringent investigation and approval process, the average transaction price fell somewhat in 2011, hitting RMB 40,141 per sqm in 4Q11, a 2.2 percent year-on-year reduction. As a result of better locations and more competitive products, the premium apartment price has been influenced to a lower extent than prices in the mass residential market. In 2012, the supply of high-end apartments is predicted to grow, while the prices of luxury apartment complexes in prominent locations are projected to remain stable. However, in the face of the continued harsh environment, high-end apartment complexes outside the Fourth Ring Road are projected to begin offering incentives to potential purchasers, which will increase the transaction area in 2012.

 

a business

Most warehouses are fully leased due to strong demand from e-commerce, retail, and 3PL companies; MNCs and hi-tech businesses prefer high-quality business parks.

Organizing: In 2011, five high-quality logistics warehouses entered the market, contributing approximately 177,000 square meters of new supply, a y-o-y increase of around 65,000 square meters. The overall stock of Beijing's high-quality logistics warehouses has topped 1.3 million square meters, up 15.6 percent year on year.

Throughout 2011, strong demand resulted in the complete leasing of the majority of warehouses across the market, as well as record-breaking high rentals. By the end of 4Q11, average net effective rentals had risen 15.5 percent year on year to RMB 0.99 per sqm per day. Net absorption was strong, and market vacancy dropped to 0.6 percent from 5.1 percent at the start of 2011. New logistics projects have been promptly preleased by e-commerce firms, merchants, manufacturers, and 3PL providers, with the e-commerce sector showing particularly significant demand. Meanwhile, more companies are pre-leasing space or sourcing build-to-suit and self-build possibilities to secure prime space in the increasingly congested logistics sector.

Six projects are expected to come online in 2012, totaling more than 200,000 square meters of new space. According to Jones Lang LaSalle, the exponential growth of e-commerce enterprises, as well as the rapid expansion of retailers and 3PL providers, new projects will continue to have strong net absorption statistics. The vacancy rate in the market is likely to remain low, with average net effective rentals topping RMB 1.1 per sqm per day.

Business Park: In 2011, the Beijing Electronics Zone (BEZ), Beijing Development Area (BDA), and Zhongguancun saw the most fresh supply of high-quality business parks. By the end of 4Q11, fresh supply of excellent business parks had surpassed 350,000 sqm, up 100,000 sqm year over year, bringing total stock to 2.8 million sqm.

MNCs and high-tech businesses are increasingly choosing quality business parks as the location for their headquarters or R&D centers. This developing tendency is driven not only by the extension of favorable tax policies and possible cost savings, but also by the expansion of areas such as BEZ, Zhongguancun Software Park, and BDA to provide more specialized and integrated services. Meanwhile, to meet their demand for varied and bespoke office space, some MNCs and domestic enterprises with strong bank sheets are beginning to focus on build-to-suit business parks. The Beijing business park market saw robust demand during 2011, mostly from IT, electronics, and pharmaceutical industries. The market vacancy rate for business parks was 8.1 percent in 4Q11, with average net effective rates of RMB 3.0 per sqm per day, up 13.4 percent year on year.

In 2012, new business park supply is forecast to exceed 1.4 million sqm, with sales accounting for more than half of that. Because of the substantial supply, market vacancy is expected to develop at a moderate rate. With the price of land in Beijing continuing to rise, fast rental hikes of prime office space are projected in 2012, as well as progressive improvements in business park amenities. Strong demand from MNCs in the IT, electronics, and pharmaceutical industries, as well as high-tech companies and developing businesses that are cost-conscious, will continue to drive rents upward.