Beijing, June 27, 2024 ——The world-renowned real estate service and consulting company DTZ released the Report on the Office Retail Market in Beijing in the Second Quarter of 2024. Wei Dong, chief policy analyst of DTZ and head of the North Area Research Department, said that the office market transactions mainly focused on relocation and lease renewal, and cost reduction and efficiency increase and price for volume trading continued to be the main theme for office tenants and owners in enterprise operations.

The rent of Beijing office building market continues to decline, and relocation and renewal are the main transaction types of enterprise tenants

In the second quarter of 2024, there will be no new supply of Grade A office buildings in Beijing. So far, the rent level of Beijing office building market continues to be in a downward range, with the city's rent falling 3.9% month on month, down 11.7% year on year to RMB279.2 per square meter per month, and the rent of the five core business districts falling 3.8% month on month, down 10.5% year on year to RMB329.7 per square meter per month. Some enterprise tenants grasped the bargaining advantage to complete the demand for upgrading and relocation. The transaction of large-scale leases in the market drove the quarterly net absorption of the office building market in Beijing to 45000 square meters, with the vacancy rate dropping 0.3 percentage points to 18.0% month on month. The quarterly net absorption of the five core business districts was 57000 square meters, with the vacancy rate dropping 0.7 percentage points 12.4% month on month.

In this quarter, the financial industry, TMT and professional service industry continued to be the main transaction area of the rental market, accounting for 33.8%, 25.5% and 20.3% of the total transaction area of all industries, respectively. From the perspective of transaction type, the market demand for lease is mainly relocation and renewal, accounting for 45.5% and 25.5% of the total quarterly lease transaction area respectively. First, under the enterprise's goal of "cost reduction and efficiency increase", owners have provided more active leasing strategies to attract new tenants, including more attractive rent, longer rent free period, legacy decoration, and even decoration services or subsidies for tenants. Therefore, if tenants choose to relocate at this time, they can upgrade the office environment and quality while reducing costs. Second, in order to retain high-quality tenants to renew their contracts, the owners provide more favorable rental prices to tenants whose contracts expire, thus seizing the market opportunity. For tenants, the renewal of the contract not only saves the decoration cost brought by the relocation, but also requires the following adjustment of the rent budget.

The vacancy rate of the office building market may continue to rise in the second half of the year

In the second half of the year, the market will welcome about 425000 square meters of new supply, of which more than 90% are located in non core areas. Deng Shanshan, Head of DTZ's North Area Project and Enterprise Service Department, said: "The entry of new projects into the market will continue to increase the market vacancy rate, and cost control will remain the main leasing strategy in the market in the short term. It is expected that in the second half of the year, weak market demand and new supply will continue to put pressure on the leasing market, and the market rent level may continue to face a downward trend."

The quality improvement and upgrading of the retail market continued to accelerate, and the new retail space was mostly in industrial and residential areas

In the second quarter, Beijing retail market ushered in the opening of shopping centers such as Changping Super Heshenghui and Xibeiwang Wanxianghui, bringing 425000 square meters of high-quality retail space to the market, and the total stock of shopping centers in the city rose to 15.45 million square meters. Although the new project is located in the non core area of the city, there are many industrial parks and residential areas around. The project has made full use of its larger space advantages to create a diversified experiential consumption space. For example, Northwest WangwangVientiane has created two theme spaces: skateboard park and Mufeng Square; In addition to introducing several regional first stores, Changping Super Hopson Plaza has also built an outdoor square of about 30000 square meters around the project, greatly enriching and improving the consumption and entertainment scenes in the region.

The transformation and upgrading of traditional business districts and projects is still the main theme of retail market development in this quarter, and the overall market is actively upgrading from business districts to projects to brands. In this quarter, the Beijing Municipal Bureau of Commerce issued a notice on soliciting support for quality improvement projects in the business district in 2024, giving financial support to department stores, shopping centers, specialty stores, etc. that apply for upgrading. With the support of policies, the upgrading of Beijing retail market will also continue to accelerate.

Meng Yi, Head of Business Department of DTZ North, said: "The lifestyle retail brands introduced by shopping centers in this quarter have gradually become high-end, and the opening of new leisure catering stores has remained active. In the second half of the year, the Beijing retail market is expected to launch projects in non core areas, but the surrounding industries and residential areas are relatively concentrated, which will greatly facilitate and meet the consumption needs of residents in the region and improve the consumption environment in the region. " In addition, three subway lines will be opened in Beijing this year: Line 12, Line 3 Phase I, and Changping Line South Extension Phase I. These three lines are distributed with multiple large-scale shopping centers, which will not only bring convenience to residents, but also drive the vitality of commercial consumption along the lines.