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News Release


Financial Street rents shoot up as demand in the area continues to prove strong; six new retail projects mark largest Urban supply quarter in last 13 years

​According to JLL Beijing's 2017 Fourth Quarter Property Review and 2018 Outlook

Beijing, 11 January 2018 – "Strength from domestic firms helped new projects fill up, reaffirming that pent-up demand remains in the office market," said Julien Zhang, Managing Director for JLL North China. Meanwhile, in the retail sector, 4Q17 was a peak supply quarter with six new projects coming online, including the highly anticipated WF Central in Wangfujing. Domestic investors remained the dominant source of capital demand, although a portfolio deal led a foreign investor to acquire a core office asset in a rare turn of events. Third party logistics firms continued to drive demand in the logistics market. In the residential market, the luxury apartment sales volume increased in the quarter, after strong performance was recorded at new and recent projects due to the price caps put in place by local government. Strong demand from corporate travelers and tourists give hotels a boost.

Grade A Office





New Supply

430,862 sqm

Rental Growth

0.6% q-o-q


Net absorption was strong in the quarter, as new completions entered the market with significant pre-commitment. Demand was dominated by domestic finance and IT firms, as foreign companies remained slow to expand in the market. Several IT companies started to consider recent completions in Olympic Area as an alternative to Zhongguancun, where large, vacant spaces were lacking.

Two new projects opened in Olympic Area in 4Q17, bringing the total number of new projects to 10 for the year. China Overseas Fortune Centre was half-committed and received strong overflow demand from IT tenants who were unable to find space in the tight Zhongguancun submarket. Nearby, Hengyi Building entered the market more than half-committed. Due to the new supply, Grade A vacancy increased slightly to rest at 7.1% by year-end.

Financial Street rents climbed 3.2% q-o-q, recording new highs after rising for a thirty-fifth consecutive quarter. Due to the unique advantages of being close to national regulators, finance firms with high affordability continue to prove how important the area is for business. By contrast, CBD rents were flat as existing buildings were in competition with future buildings.

2018 Outlook: Domestic firms are set to remain the dominant source of demand for the office market. Meanwhile, rents are expected to follow similar trajectories to 2017, with CBD and Finance Street rents continuing to diverge. "Over the coming months, we will also see co-working operators continuing to be highly active in the market, particularly as operators push forward with fast-growth strategies across the city," said Eric Hirsch, Head of Markets for JLL North China. "This new layer of occupiers adds another dimension to the demand trends that we have traditionally followed."


It was a relatively busy year for investment in Beijing, with nearly 20 major deals contributing to a transaction volume of RMB 24 billion in 2017. In the quarter, notable deals included the sale of W Hotel along Chang'an Avenue by COFCO to Sichuan-based investment fund Tianfu Group for RMB 2 billion, and a China Merchants portfolio deal. Purchased by PAG Asia, the portfolio included an office asset in a core location of Beijing and served as one of the few deals in the city to be transacted by a foreign investor in recent years.

Domestic investors continued to dominate the market in 2017, as stricter capital controls pushed more mainland Chinese investors to actively search Beijing for opportunities. Interest in convertible properties was high among prospective buyers during the year. As aging stock in Beijing provides new scope for value-add plays, many investors are seeking suitable retail or hotel assets to convert to office space in a bid to target higher gains.

2018 Outlook: Beijing core area opportunities have become a rarity in the market, but much more valuable to investors. Interest in office properties is especially high, as office demand and potential for high rental returns remains strong. Apart from core office assets, we also see rising interest from both institutional investors and self-use buyers in business parks in mature areas such as Zhongguancun and Wangjing, which benefit from convenient transport networks and ample amenities," said Michael Wang, Head of Capital Markets for JLL North China. "These opportunities will no doubt support the investment market in Beijing over the next 12 months."

Prime Retail





New Supply*

865,400 sqm

Rental Growth

0.7% q-o-q

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

Flagship openings were popular at the newly opened and highly anticipated WF Central project in Wangfujing. Lingerie retailer Victoria's Secret opened its three-floor Asia flagship, making it the first store in Beijing to provide access to full product lines. Also at the project, Pandora opened its global flagship store, and Superdry opened its China flagship store.

It was a peak supply quarter, with 4Q17 marking the largest quarterly supply for the Urban market since 2004 – closing out the largest annual Urban supply year since 2010. A total of six new projects entered the market in the quarter, adding 395,400 sqm of Urban supply and 470,000 sqm of Suburban supply. Key openings in 4Q17 included the WF Central project along the busy Wangfujing pedestrian street and MixC Miyun, the first large-scale shopping mall in the far north of Beijing. WF Central opened with high commitment, while MixC Miyun was fully committed with the majority of its tenants entering Miyun for the first time.

The slow growth environment persisted in the quarter. Urban rental growth remained slow, but recorded a slight increase from the previous quarter as landlords of market-leading projects had greater bargaining power; rents grew 0.7% q-o-q and 1.7% y-o-y. The Suburban market continued to outpace the Urban market, registering 0.9% growth q-o-q and 3.2% growth y-o-y.

2018 Outlook: New supply will start to shift its focus from the Urban market to the Suburban market over the next 12 months. By end-2018, new Suburban supply will make up the majority of new supply (58%), while new Urban supply is set to contribute to less than half of new supply (42%). By 2019, new Suburban supply will dominate new supply (at nearly 90%). Landlords of new projects will continue to seek F&B and children's brands, as these tenants remain popular, especially for malls in the suburbs which cater to young families. "At the same time, premium cosmetics will be an area for growth at destination and regional malls," said Zoe Yang, Head of Retail, Tenant Representative for JLL in Beijing. "We are also likely to see new retail supermarkets eyeing malls, particularly as the most competitive players in this rising sector look to upgrade from low-end projects."






New Supply

0 sqm

Rental Growth

1.2% q-o-q

E-commerce firms and supporting 3PLs continued to be active in the quarter. However, the limited availability of large space in mature submarkets held back demand. Meanwhile, tenants of low-end projects were active in seeking space as the government accelerated demolition of unlicensed facilities across the city. Beijing was unable to accommodate this demand given its low vacancy rates and tight land supply, resulting in many transactions in surrounding areas such as Tianjin's Wuqing and Beichen submarkets.

Due to restrictions on winter commercial construction, two projects originally scheduled for completion in 4Q17 were delayed to 1H18. With no new projects entering the market, the tight vacancy rate remained unchanged at 1.7%, leaving very limited space available for lease. Total logistics stock was stable at 2 million sqm.

Landlords of projects in mature submarkets retained their bargaining power to increase rents due to the tight-vacancy environment. Beijing Airport Logistics Park saw the largest rental increase of 2.2% q-o-q, helping to push up overall rents 1.2% on a like-for-like basis. Meanwhile, no en bloc sale transactions were recorded in the quarter, but experienced developers remained interested in expanding their presence in the market by purchasing industrial facilities from local landlords. 

2018 Outlook: Six projects totaling 370,000 sqm are scheduled for completion in 2018 and will amount to the highest annual new supply level since 2010. Despite the large pipeline, pent-up demand from e-commerce giants and 3PLs, as well as tenants in low-end projects looking to upgrade, is expected to help new projects fill up throughout the year. Despite the surge in new supply, pent-up demand in the market is expected to keep vacancy at bay. This will allow headroom for moderate rental growth over the coming months."

High-end Residential



Serviced Apartments



New Supply

195 units

Rental Growth

0.4% q-o-q

Luxury Apartments

New Supply

772 units

Capital Values Growth

-0.7% q-o-q

Rental Growth

1.2% q-o-q

High-end Villas

New Supply

129 units

Capital Values Growth

0.9% q-o-q

Rental Growth

0.6% q-o-q

The luxury apartment sales volume increased 76.5% q-o-q in 4Q17, after strong performance was recorded at many new and recent projects due to lower prices resulting from the price caps implemented by local government. Meanwhile, limited new supply pushed high-end villa sales down 15.4% q-o-q. Housing demand was restrained further as the tight-policy environment persisted in the quarter, with banks in Beijing increasing mortgage rates by 10-20% over the benchmark lending rate for both primary and secondary homebuyers.

Housing authorities continued to urge developers to launch projects: 772 luxury apartment units were released in 4Q17. Meanwhile, six villa projects released 129 units in the market. One new serviced apartment project with 195 units, Ascott Riverside Garden Beijing, fully entered the market. Despite its outer location by the Fourth Ring Road, the project reached high occupancy under a very competitive rental strategy.

Primary capital values growth for luxury apartments remained negative, registering -0.7% q-o-q as prices continued to be restricted by policy. Meanwhile, stable demand and limited supply supported modest growth for primary high-end villa capital values (0.9% q-o-q). Due to steady leasing demand, rents for luxury apartments and high-end villas inched up 1.2% q-o-q and 0.6% q-o-q, respectively.

2018 Outlook: Under steady supply and limited price growth, the luxury apartment sales volume is likely to remain stable in the year. Despite price caps set by the local government, supply should be steady as authorities continue to urge developers to launch new projects in the market. "Looking ahead, however, less land supply is expected for the high-end residential market as the local government focuses on developing the residential rental market and joint-ownership housing projects over the next five years," said Joe Zhou, Head of Research for JLL China. "At the same time, central government support, for several large REITs and financial derivatives related to long-term residential rental projects, is projected to further support the residential rental market."



YTD November 2017







Note: Hotels refers to the upscale hotel market. *ADR inclusive of service charge.

Increasing demand from corporate travelers and tourists coupled with no new supply in the quarter helped boost hotel performance in 4Q17. As at YTD November, significant RevPAR growth of 4.0% y-o-y was recorded, driven mainly by the higher average daily rate (ADR), which increased 1.2% to RMB 1,030.8. The gains were recorded as overall occupancy remained high at 74.4%, up 2.0 percentage points y-o-y.

Despite no new supply in the quarter and a relatively limited year of supply, 2017 witnessed the prestigious Bulgari Hotel Beijing open in Third Embassy Area. With 119 rooms, Bulgari Hotel​ Beijing opened in September, serving as the high-end brand's foray into China and fourth luxury apartment following locations in London, Bali, and Milan. Apart from Bulgari Hotel Beijing, Hotel Jen and Pan Pacific opened in the year, adding a total of 789 hotel rooms to the market in 2017, down from 1,479 hotel rooms in 2016. 

Over the next 12 months, new supply is expected to surge as 13 hotels are set to open, more than tripling the number of rooms in 2017 with 2,840 rooms coming to the market in 2018. Notable hotel openings include Puxuan Hotel (116 rooms) and Mandarin Oriental Hotel Wangfujing (74 rooms). Unlike previous years, the majority of new supply will be located in emerging business clusters or suburban areas such as Shunyi, Fengtai, Changping, and Wangjing (including Marriot Hotel Changping and Hyatt Regency Hotel Wangjing). 

2018 Outlook: The trading performance of upscale hotels is expected to further rise in 2018, as demand from tourists is expected to remain high. Despite the large pipeline, many new openings will be outside of traditional business clusters and the city centre, allowing the ADR of existing upscale hotels to climb further. At the same time, new hotels in the outer areas are also expected to record relatively high ADRs in spite of their outer locations due to their high-end positioning. Also, some developers are upgrading old hotels or converting poorly performing hotel properties in the city center to office, which is expected to boost the overall performance of the market. "Under the stable demand and dispersed future supply, we expect hotel trading performance to steadily rise in 2018, said Adela Zu, Vice President of Hotels & Hospitality for JLL in Beijing. "We also see the hotel investment market becoming more active in recent years, which demonstrates growing interest in Beijing from investors."

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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 2017, JLL had revenue of $7.9 billion and fee revenue of $6.7 billion; managed 4.6 billion square feet, or 423 million square meters; and completed investment sales, acquisitions and finance transactions of approximately $170 billion. At the end of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of 82,000.  As of December 31, 2017, LaSalle had $58.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit

JLL has over 50 years of experience in Asia Pacific, with over 37,000 employees operating in 96 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​​.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​