Beijing's Grade A office market sees recovery in Q4

Beijing's Grade A office market saw a structural recovery of demand in the fourth quarter in spite of the new wave of pandemic, industry research showed.

In the fourth quarter, the net absorption of the market turned positive, reaching 42,000 square meters, according to Yan Quhai, Managing Director of Colliers in North China.

Only one new project entered the capital's market of the core Grade A office building in the whole year. The new supply pressure in 2022 was greatly reduced. Demand continued to recover and supply pressure eased, with the vacancy rate falling to 16 percent at the end of the year and the price of rent dropping 1.7 percent month-on-month to 331 yuan($47) per square meter.

"Compared with the Grade A office market, the Grade B market and industrial park market are facing greater pressure, and the demand remains weak." Yan said. In the fourth quarter, the net absorption Beijing's Grade B market was -65,000 square meters, and the industrial park market was -120,000 square meters. For the full year, the annual net absorption of Grade B decreased from 335,000 square meters last year to -158,000 square meters, and the industrial park from 1.42 million square meters to -227,000 square meters.

A combination of factors has led to a sharp downturn in the market performance of 2022. Lu Ming, head of the North China Research Department of Colliers, said that there are four core factors influencing the trend of market demand in 2022: 1. The pandemic containment continues to affect the activity of office leasing; 2. Enterprises generally hold conservative expectations and lack the willingness of office expansion; 3. Most enterprises maintain the strategy of cost reduction and efficiency increase in office leasing; 4. The office demand of Internet technology enterprises shrinks sharply. Sustained demand side recovery requires positive changes in the four core factors mentioned above.

According to Yan, the impact of the pandemic on 2023 will gradually weaken after the first quarter, and the impact on the activity of the office leasing market will be significantly reduced. As the market is expected to recover, the willingness of enterprises to expand will continue to improve, contributing to the release of office demand.

Zhang Ying contributed to this story