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News Release


Start of new supply wave triggers upgrade demand in the office sector; Wangfujing high street eyed as location for luxury expansion in Beijing


According to JLL Beijing's Second Quarter Property Review

Beijing, 13 July 2017 – "Domestic tenants seeking to upgrade office space in the city grabbed opportunities that came to the market, as the very first buildings in the new supply wave completed and gave tenants access to quality buildings across multiple submarkets in Beijing," said Julien Zhang, Managing Director for JLL North China. Meanwhile, in the retail sector, Spot on WFJ sold to an individual buyer for RMB 2.2 billion, while One City community mall in Wangjing was purchased by Ping'an Trust for RMB 1.25 billion, and may be considered for office conversion. Investors showed high interest in potential office conversions and continued to search the market for potential opportunities. Leasing activity picked up slightly in the logistics sector, where e-commerce and third party logistics companies remained the dominant source of demand. In the high-end residential sales market, the latest cooling measures had a significant impact on demand, supply, and prices. 

Grade A Office

​According to JLL Beijing's Second Quarter Property Review

A total of four new Grade A office projects completed in the CBD, Olympic Area, Wangjing, and East Chang'an, altogether adding 270,000 sqm (GFA) of new supply to the leasing market. The average commitment rate for these projects reached a remarkable 78% at end-2Q17 due to strong pre-leasing, previously an uncommon practice in Beijing. "We saw domestic finance and professional services firms jump at the chance to upgrade or consolidate their space in the market" said Eric Hirsch, Head of Office​ Leasing for JLL in Beijing. "The speedy take-up in the ​​quarter also confirmed that pent-up demand still exists in the market."

Overall rental growth was flat q-o-q, despite some CBD landlords significantly lowering rents in the quarter. Under increasing competition, several landlords in the CBD cut rents for established companies in a bid to reduce pressure from incoming supply. But modest growth in the tight Finance Street and Zhongguancun submarkets managed to offset rental declines in the CBD in 2Q17. The new completions, meanwhile, had little impact on rents in the quarter, as pre-leasing efforts at these projects were previously factored into the market.

Pre-leasing efforts will further increase competition in the CBD. Landlords of existing CBD buildings will compete with future CBD landlords as they offer discounted rental fees to secure quality tenants ahead of schedule. While new supply in Olympic Area and Lize will add to downward pressure on rents, this will be countered by rental growth in the mature Finance Street and Zhongguancun areas, where demand is expected to remain strong.


No prime transactions were recorded in the quarter, but a few notable office and retail deals were observed in the market. In the retail sector, Spot on WFJ, located at the top of Wangfujing pedestrian shopping street, was sold to an individual buyer for RMB 2.2 billion. In Wangjing, One City community mall was purchased by Ping'an Trust for RMB 1.25 billion, and may be considered for office conversion.

As office conversions continue to draw huge interest in the market, investors remained active in looking for potential opportunities. "Since the retail-to-office conversion project at Pacific Century Place completed a year ago in the high-profile Sanlitun are​​a, several other office conversions have sprung up in the market as landlords and investors​ have been inspired to follow suit and pursue potentially higher gains," said Kevin Qin, Head of Capital Markets at JLL in Beijing. "As more suitable opportunities present themselves, we expect to see a greater number of high-quality office conversions complete to form a small, but unique contribution to the market."

Prime Retail

​According to JLL Beijing's Second Quarter Property Review

Luxury retailers planned for expansion, setting their sights on "China's most famous shopping street" in Wangfujing. Luxury houses such as LVMH, Kering, and Richemont signed leases with the landlord at future project WF Central – situated in the heart of Wangfujing pedestrian street – suggesting that luxury retailers still plan to expand in Beijing. Improving luxury sales in China suggest that demand has started to "re-localise," following narrower price gaps between China and overseas markets, and stricter domestic customs controls.

China World Mall New Zone officially ​opened with commitment resting at 85% by end-2Q17, after LeTV terminated its entire floor-lease. Several brands from luxury phases of China World Mall relocated to the less expensive project. Highly popular F&B tenants filled pent-up demand for quality dining options in the CBD. Meanwhile, cultural retail project​ Dashila Beijing Fun entered the market with just 30% physical occupancy. Located in the historic Qianmen area swarming with tourists, the mall features art and culture tenants like Beijing Design Week, Central Academy of Fine Arts, and China National Academy of Painting. Also in the quarter, Parkson closed its department store in Changying, leaving its Fuxingmen store as the sole remaining location in Beijing.

Major developers revealed retail plans to develop the underserved West Beijing area. Under its new asset light strategy, COFCO will work with Beijing-based residential developer Huayuan to develop a mall in the western suburbs of Beijing. Longfor is also planning three projects in the vast West Beijing expanse, where quality retail supply is presently lacking. "Given the highly sophisticated retail development of the east, and fast progress in the south, development of the west makes perfect sense," said James Hawkey, Head of Retail Leasing for JLL China. "This is because West Beijing is comparatively low on quality retail offerings, but high in consumption potential due to the large demographic of wealthy families with large disposable incomes residing in the area."

Upscale Hotels

​According to JLL Beijing's Second Quarter Property Review

The average daily rate (ADR) dropped 2.7% q-o-q to RMB 1006.1 in the first five months of the year, as the new VAT reforms weighed on the market. Despite the declining ADR, occupancy increased 2.5 percentage points q-o-q to 69.7% as leisure and MICE travelers continued to support demand. This helped push up the RevPAR slightly by 0.8% q-o-q to RMB 700.8.   

Hotel Jen – branded under the Shangri-La banner and belonging to the massive China World Complex in the CBD – entered the market with 450 rooms. By end-2017, another six hotels​ are expected to add a total of 1,400 rooms to the market. Key openings include two luxury hotels: Bvlgari Hotel Beijing (120 rooms) and Puxuan Hotel (116 rooms). Most of the other hotels are concentrated in emerging business clu​​​​sters or suburban areas.

Hotel performance is expected to rise in the second half of the year. The high-positioning and limited number of rooms for the two new incoming luxury hotels coupled with the relatively restrained supply pipeline for established commercial areas in the city is expected to drive up the ADR in 2H17. During this busier travel period, occupancy rates should also get a boost, which is further expected to support a moderate increase in the RevPAR. "We are also seeing some hotels in busy trade areas upgrading to serve rising demand from travelers seeking high-quality stays in the city," said Adela Zu, Vice President of Hotels & Hospitality for JLL in Beijing. "This demand will be further supported by an increase in short-haul travel in the future as Beijing continues to grow through the development of its outer areas, the construction of a second airport, and the opening of a Universal Studios."


​According to JLL Beijing's Second Quarter Property Review

The mature submarkets were still the most sought-after location, as vacant spaces were quickly leased out in the quarter compared to the relatively slower leasing market in 2016. Third party logistics​ firms and e-commerce giants continued to drive demand in the market, although the leasing progress remained slower in remote locations. The more active leasing market in the mature areas, meanwhile, helped landlords with modest rental gains. As a result, overall rents inched up slightly. 

No en bloc transactions were recorded in the quarter, but the market continued to attract interest from both de​​velopers and investors. We expect to see more warehouse acquisitions in the future, especially in the second-hand market. Overall vacancy will start to rise from 2018, when new supply is expected to peak at more than 300,000 sqm. But delays may result from changes in government policy. The large amount of incoming supply is expected to lead the 2018 rental growth rate to be slower than that recorded in 2017.

High-end Residential


The latest cooling measures significantly curbed demand, supply, and prices in the high-end residential sales market. Under tighter policy, the luxury apartment sales volume shrank 37% q-o-q and 36% y-o-y. High-end villa demand was less restrained; the sales volume grew 20% q-o-q, but was -42% y-o-y. Meanwhile, a 10-year cap on leasing terms was announced in the quarter to close loopholes in the leasing market, to prevent developers from selling sales projects disguised as leasing projects.

Just one luxury project launched in the quarter, marking the only new high-end apartment supply for 1H17. Located on the South Second Ring Road, The Pearl on the Crown received pre-sales certification for 192 units, but entered the market with significantly lower quotations than nearby residential projects under the latest policy restrictions. In the high-end villa market, 347 high-end villas were released in the quarter, up 37% q-o-q. In a further bid to stabilise the market, Beijing housing authorities publicly named stalled projects to pressure developers with developments under construction to complete while others were urged to start construction on purchased land.

Secondary capital value growth rates started to fall. Luxury apartment primary capital values increased 1.1% q-o-q, as demand outpaced supply. The figure for high-end villas grew slightly faster at 2.5% q-o-q. As a result of the tightening policy in the second-hand sales market, secondary capital value growth rates for both markets dropped 1.2% q-o-q and 1.0% q-o-q, respectively. Despite steady leasing demand, rental growth was slightly slower due to a small increase in leasing supply; q-o-q rents for luxury apartments, high-end villas, and serviced apartments rose 0.9%, 0.8%, and 0.5%, respectively.

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About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At the end of the first quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 78,000. As of March 31, 2017, LaSalle Investment Management had $58.0 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit

JLL has over 50 years of experience in Asia Pacific, with 36,800 employees operating in 95 offices in 16 countries across the region. The firm won the ‘World’s Best’ and ‘Best in Asia Pacific’ International Property Consultancy at the International Property Awards in 2016 and was named number one real estate investment advisory firm in Asia Pacific for the sixth consecutive year by Real Capital Analytics.​​  

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​.​​​​​​