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Decentralised and demystified: JLL uncovers key trends shaping the future of Beijing’s office market

​Chinese multinationals will shift into overdrive as market continues to grow and mature

BEIJING, April 6, 2017 – A genuine decentralised office market – separate in form and function from the increasingly mature central areas – is imminently set to emerge, as Beijing continues along the path towards maturity to earn its place am​​​​​​​​ong the world's top office markets, according to new research from JLL (NYSE: JLL). The company's latest whitepaper 'No Turning Back - Beijing's Office Market Set to Shine' highlights key trends as it explores the future of the Beijing office market from three aspects: geographical landscape, demand prospects, and office building features.

"We have reached a key turnin​g point in the evolution of the Beijing office market​," says Eric Hirsch, Head of Markets, JLL Beijing. "As the market continues to mature, abundant new supply is coming online and domestic occupiers are dominating the market. Under intensifying competition, more companies are requiring better quality buildings, particularly as health and productivity take on new levels of urgency in the race for talent."

The new landscape – a bigger market for a growing city

Alongside the rise of new landmark developments in the CBD that are set to redefine the skyline in the central areas, Beijing will witness the rise of a decentralised market, driven by the development of Lize and Tongzhou.

"With the second-highest Grade A office rents in Asia, major expansion in urban rail mass transit, and one of the tightest office market globally, the time for decentralisation in Beijing is upon us," says Steven McCord, Head of Research for JLL North China. "In turn, this is driving a re-categorisation of submarkets, in which the set of "core" areas will grow to include rapidly maturing areas such as Wangjing, as the central areas are separated from the new, decentralised market that will stand apart on its own."

The report adds that underlying demand for decentralised office space will be further bolstered by the regional integration policy or "Jing-Jin-Ji", which is expected to fuel business activity outside of Beijing and lead companies to require faster access to peripheral locations.

The demand story – domestic firms start to dominate

Now accounting for 59% of the leasable Grade A space in the market, domestic firms have shown sharp growth in their share of occupied space across the city in the last year, according to the report which based findings on JLL's annual survey of 70 Grade A office buildings in Beijing. "As market maturation continues, we expect to see this trend deepen and domestic firms increasingly dominate the market, similar to how US firms make up the majority of the New York market," says Eric. "Key sources of future demand will come from the rise of the finance sector, the upgrade trajectory of IT firms, and in the internationalisation of China's burgeoning global companies."

Additionally, China's 'One Belt, One Road' policy is set to put domestic companies into overdrive and contribute to demand for headquarters operations in Beijing. "As homegrown giants expand overseas and require more office space to oversee this activity from a dependable home base, the Chinese capital will have the most to gain as it is already home to a high-density of decision-makers, in both state-owned enterprises and private-sector firms," McCord adds.

Building for the best – stepping up standards to meet global benchmarks like The Shard in London

New buildings continue to raise baseline standards in the market, and this has helped the quality of office buildings in Beijing make large strides in recent years. The most concrete standards having advanced the fastest, but better hardware is still needed, the report states, drawing from data collected at more than 200 buildings in the city. For example, 86% of buildings in Beijing have ceiling heights that are on par with global benchmarks, while only 27% of Grade A buildings in Beijing are filtering the air sufficiently to manage bad-air days.

"As the business world continues to evolve, tenants need buildings with better infrastructure that allow for greater flexibility in layout and function," says Hirsch. "The amount of money required to develop a top-notch building over a low-specification building is increasingly dwarfed by the rising price of land, which is incentivizing developers to build quality as a boost to their long-term investment. This is a promising and necessary trend for the market."

By benchmarking existing and future buildings in Beijing against The Shard in London, one of the best-in-class globally, Beijing's position in the race to the top is clear. "Looking at some of the most visible features, the average building in Beijing compares favourably with The Shard," says McCord. “But as a market, Beijing is held back by its low provision of toilets and lifts relative to The Shard. However, with improved features, the next generation of buildings set to enter the Beijing CBD is destined to raise the overall level of sophistication for the Beijing market and narrow the gap in standards between Beijing buildings and The Shard.” 

Read more about <No Turning Back – Beijing’s Office Market Set to Shine​>

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About JLL

JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $59.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information,

JLL has over 50 years of experience in Asia Pacific, with over 34,000 employees operating in 92 offices in 16 countries across the region. The firm won 15 awards at the International Property Awards Asia Pacific in 2016 and was named number one real estate advisor in Asia at the 2015 Euromoney Real Estate Awards.  

​In Greater China, the firm was named ‘Best Property Consultancy in China’ at the International Property Awards Asia Pacific 2016, and has more than 2,200 professionals and 14,000 on-site staff providing quality real estate advice and services in over 80 cities across the country.​​​​