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Office, luxury residential sectors developing
By Jia Hepeng (China Business Weekly)
Updated: 2004-10-26 09:55

China's booming economy and expected reductions in property supplies have ensured the stable growth of Beijing's office and luxury residential real estate markets, indicates the most recent quarterly report by property advisers DTZ Debenham Tie Leung.

The international firm, which has an office in Beijing, released the report last week.

Beijing's Grade-A office market showed an upward trend, in terms of sales and leasing, during the third quarter. Four Grade-A office buildings were completed -- three in Zhongguancun and one near the Asian Games Village -- during the quarter -- in the high-tech hub Zhongguancun and Asia Games Village.

That meant nearly 100,000 square metres of additional office space entered the market. Meanwhile, the average rent for a Grade-A office rose 1.4 per cent, to US$25.20 per month per square metre.

The vacancy rate of office buildings in Beijing rose to 13.4 per cent, up from 9.5 per cent in the second quarter, due to the large supply of office space that entered the market in a relatively short period of time.

"Although there were some new (office properties), they were not located in the city's central business district (CBD) or other major business hubs," Richard Lum, office department director at DTZ Beijing, said during the company's quarterly news conference.

"As a whole, the strong demand has not been satisfied."

DTZ, which is headquartered in Hong Kong, has branch offices in major Chinese cities.

The opening of China's market to the world and rapid economic growth in Beijing have contributed to the strong demand for office space in Beijing.

Due to the lack of new office properties and the low vacancy rate in CBD, the average rent for office space in the district rose 5 per cent, DTZ said in the report.

Lum cautioned the supply of office space in Beijing, most especially in eastern Beijing, where CBD is located, will increase substantially over the next three years.

That, he added, could result in a glut.

Lum estimated 800,000 square metres of office space will enter the market next year; in 2006, 700,000 square metres; and in 2007, another 700,000 square metres.

"As increased supplies (of office space) will lower rents, it is wise for developers to delay the completion of their projects," Lum said.

In terms of luxury residential properties, Angela Shew, residential department director of DTZ Beijing, said, in the past quarter, very few new projects were launched in Beijing.

As a result, average residential rents rose 1.1 per cent from the previous quarter. In turn, the vacancy rate fell 2.2 percentage points, to 18.4 per cent.

"Given China's booming economy, multinational companies sent more senior managers ... to China. That increased demand for high-end, serviced apartments," Shew said.

The average rent for high-end, serviced apartments in Beijing rose from US$26.60 per month per square metre to US$27.30 per month per square metre.

Growth in supply and demand for high-end villas remained quite stable. The vacancy rate of high-end villas remained at 12.3 per cent, which was the lowest rate in terms of residential properties.

DTZ's report also indicated, between January and September, land sales in Beijing fell 63.7 per cent compared with the same period last year.

Lydia Wang, director of DTZ Beijing's consulting and research department, said the decrease in land sales might cause property supplies to dwindle, which might cause prices to rise.

Between January and September, 10.34 million square metres of housing were sold in Beijing.

The growth rate of housing sales, year-on-year, increased from 3.5 per cent, in the first quarter, to 25 per cent in the third quarter.

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