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News Release


CBD rents dip for second consecutive quarter as shift towards tenant’s market begins

​According to JLL Beijing’s First Quarter Property Review

Beijing, 13 April 2017 – “Recording its second consecutive quarter of rental growth decline, the CBD started to shift towards a tenant’s market. Landlords offered more flexible terms in an attempt to secure reputable tenants ahead of the incoming wave of new supply set to enter the area over the forecast horizon,” said Julien Zhang, Managing Director for JLL North China. Meanwhile, in the retail sector, China World Mall New Zone finally entered the market with a soft-opening. The project is expected to become a retail hotspot in the CBD, serving as the ultimate retail destination in the area with a range of pricing points as well​ as dining and nightlife options for white-collar workers. In the quarter, investors showed great interest in value-add industrial projects. E-commerce and third-party logistics giants drove logistics leasing activity. In the residential market, sales demand continued to be dampened by the policy-tightening environment. 

Grade A O​ffice 

New Supply122,363 sqm
Rental Growth-0.3% q-o-q

Despite extremely high rents in Finance Street, the submarket continued to receive strong interest in the quarter. Enquiries from securities firms dominated, as these firms look to tap into capital from homebuyers who are locked out of the restricted housing market. IT and professional services also continued to support leasing demand in the market​. Meanwhile, domestic firms remained the most active as foreign firms continued to demonstrate cost sensitivity. ​

CBD rents declined slightly for second straight quarter. Landlords in the submarket continued to be flexible on rents and increased leasing incentives, as they competed to secure reputable tenants in advance of incoming new supply. Other submarkets were stable. Wangjing and Zhongguancun recorded modest rental increases, as they were unaffected by the increasing competition in the CBD.

CBD rents to drop 15% over forecast horizon. Strategic landlords will set the pace and lead a step-wise rental decline in the CBD, as the​ mature submarket receives a large and steady stream of new supply fro​m 2Q17. As a result, CBD rents are expected to register a double-digit decline by end-2021. "The increasingly competitive market will reward landlords with well-planned leasing strategies, as the huge amount of future supply provides tenants with more options and drives the shift towards a tenant's market," said Eric Hirsch, Head of Markets for JLL in Beijing. "Market-informed landlords who make strategic adjustments to be more attractive to tenants will benefit from strong leasing performance." ​


No major office deals were transacted in the quarter, but interest in the sector remains high despite the new supply wave on the horizon. As capital outflow restrictions continue to restrain purchases abroad by domestic buyers, more investors are expected to focus on opportunities in Beijing. "The current environment is leading a growing number of investors to take a closer look at their options," said Kevin Qin, Head of Capital Markets for JLL in Beijing. "Due to the lack of available office buildings in the market, convertible properties are popular and upgrade demand is high." ​

In the outer edges of the city, meanwhile, Tongzhou and Lize continued to attract interest from investors. With a considerable amount of new supply in the pipeline, both areas are expected to drive the development of a genuine decentralised office market, which is set to rise separately in form and function from the central areas. As decentralisation gathers momentum in Beijing's office market, mid-market tenants can expect rising business activity outside of Beijing, and this will require faster access to peripheral locations – thereby boosting the appeal of Tongzhou and Lize to a greater number of investors. 

Prime Retail

Retail 4Q16
New Supply*50,000 sqm
Rental Growth0.4% q-o-q

Note: Prime Retail refers to the Urban market.
*New Supply is inclusive of the Suburban market. 

New F&B concepts are rising in popularity and serving as new sources of sector demand. Landlords are showing strong interest in Michelin-starred concepts as they begin to appear in Beijing. "Affordable" fine dining options along with organic and healthy eating concepts such as "farm to table" gaining traction in the market and generating new sources of demand for F&B. Dessert and coffee brands also continue to expand in the market and support growth.

The highly anticipated China World Mall New Zone soft-opened in the market at the end of the quarter. China World Mall New Zone entered the market, primarily from upper-floor F&B tenants. With 90% of space committed, the mall is set to open up gradually and plans to differentiate itself in the CBD through KTV and bar options which are lacking in the area. "With more affordable retail price points than the other areas of China World Mall, as well as great nightlife and entertainment offerings, this mall is catering to the spending potential of thousands of white-collar workers who descend upon the area daily, and gives people in the area an alternative for leisure and nightlife," said James Hawkey, Head of Retail for JLL China. "China World wants to become the ultimate CBD destination, and the competition had better take note."


New Supply50,060 sqm
Rental Growth0.1% q-o-q

Third-party logistics companies and large e-commerce firms continued to drive leasing activity, dominating demand in the market. Following the trend started in 2016, industry-leading companies remained active in seeking large space in mature areas. At the same time, companies with weak performance started to consider consolidating their warehouse space in lower-rent projects.

After a new, vacant project enters the market, overall vacancy edges up to 5.2% at end-1Q17. Blogis Shunyi Logistics Center completed, following its conversion from an old factory. The warehouse added 50,060 sqm of new supply to the market, pushing up overall market stock to 2 million sqm. However, the project is expected to lease out quickly, given that several potential tenants with large space requirements were negotiating terms in the quarter. 

High-end Residential

Serviced Apartments
New Supply-228 units
Rental Growth0.7% q-o-q
Luxury Apartments
New Supply0 units
Capital Values Growth-1.9% q-o-q
Rental Growth1.0% q-o-q
High-end Villas
New Supply253 units
Capital Values Growth1.5% q-o-q
Rental Growth1.8% q-o-q

Following the latest round of tightening measures, no new luxury apartment supply entered the market. Beijing suspended the approvals process for residential​ projects with asking prices higher than the transaction prices of neighbouring projects. Thus, no luxury apartment projects received pre-sales certification in 1Q17, while only three high-end villa projects adding 253 units to the market. One serviced apartment project, Fraser Residences, was withdrawn in February, after it was purchased by Thai Hot Group in 4Q16, which plans to sell its units in the second-hand housing market.

Capital values started to fall, but rents continued to rise. Primary capital values for both luxury apartments and high-end villas declined 2.3% and 0.1% q-o-q, respectively, under the restrained demand. Meanwhile, steady leasing demand drove modest rental increases: luxury apartment, high-end villa, and serviced apartment rents rose 1.0%, 1.8% and 0.7% q-o-q, respectively.

Sales demand is expected to shrink further in 2017. The latest tightening measures – expected to be strictly implemented – will largely constrain sales demand in 2017, especially upgrade demand. Meanwhile, new high-end supply will continue to be low, as policy restricting pre-sales certification for high-priced projects is not expected to relax over the short term. We anticipate some of the restrained sales demand to spill over to the leasing market, which will lead to an increase in leasing activity and a rise in rents.

​– ends –​​

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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.​​​​