Beijing Grade A Office Take-up Recovers In Q4
CHINA – Despite the resurgence of COVID-19, data from Colliers showed that demand for Grade A office space in Beijing rebounded during the 4th quarter, reported China Daily on Wednesday afternoon (28 December, SGT).
Colliers’ Managing Director in North China Yan Quhai disclosed that net office absorption in the Chinese capital became positive during the last three months of the year at about 452,084 sq ft.
For the whole of 2022, Yan noted that only one Grade A office development was completed in Beijing. Consequently, new supply pressure was significantly reduced this year and demand for office space continued to recover.
However, Grade A office vacancy in the city declined to 16 percent in December 2022, while monthly rent of such commercial properties dipped by 1.7 percent to 331 yuan (US$47) per sq m on a monthly basis.
Still, compared with the Grade B office market and industrial park segment in Beijing, the Grade A office market is faring better, as the first two are “facing greater pressure” and the demand for both assets remain sluggish, Yan explained.
In fact, net absorption of Grade B office space in the capital fell to around -699,654 sq ft in Q4 2022, while that for industrial parks plunged to roughly -1.29 million sq ft
For the whole of 2022, overall net absorption of Grade B office space declined to -1.7 million sq ft from positive 3.61 million sq ft in the prior year. At the same time, that for industrial parks plummeted to -2.44 million sq ft from 15.28 million sq ft previously.
Colliers’s Head of the research department for North China Lu Ming shared that the dismal performance of the Grade B office market and business park segment this year is due to four factors.
First, office rental activity was greatly impacted by China’s zero COVID strategy. Second, companies generally hold conservative expectations and are unwilling to expand their office footprint. Third, most firms continue their strategy of cost reduction and making more efficient use of their existing office space. Lastly, demand for workspace by the tech sector sharply declined.
Nonetheless, Yan expects the negative effect of the coronavirus outbreak on the local office market would gradually weaken after Q1 2023 due to the anticipated easing of COVID-related restrictions by the Chinese government.