According to the latest Beijing Prime Office Market Report released by Knight Frank, China’s economy slowed down in the first quarter. Rents of Grade-A offices remained unchanged in the first quarter. The vacancy rate edged up for two straight quarters, putting pressure on rental growth in the future.
Market overview:
The average rent of Beijing’s Grade-A offices remained unchanged at RMB396 per sq m per month in the first quarter. The market vacancy rate increased further by 1 percentage point to 4.8% due to tenant adjustment. The market had seen the vacancy rate up for two consecutive quarters. However, further increase in the rate is expected to be limited due to small amount of new supply.
Market outlook:
Jingjing Zhang, Senior Manager of Research & Consultancy at Knight Frank Beijing, expects the new supply of Beijing’s Grade-A offices to increase slightly in 2013 compared with 2012. Due to further stringent control on the residential market in Beijing, some purchasing power may shift to the commercial market, which will push up the transaction price and volume of commercial properties. Meanwhile, due to stagnant rental growth, capital yields in the office market are expected to decline.