Beijing office market accelerates repricing; investment activity slows while retail assets regain favor

Beijing: 8 January, 2026 – In 2025, Beijing demonstrated resilience and steady momentum amid ongoing macroeconomic uncertainties. The city’s artificial intelligence industry continued to lead the nation in scale, emerging as a key driver of a new wave of industrial chain transformation. “The Beijing office market is undergoing a cycle shift — from a ‘downturn cycle’ to a phase of ‘repricing’,” said Rayman Zhang, Managing Director for North China, JLL. “Elevated tenant bargaining power, coupled with structurally persistent oversupply, is fundamentally reshaping supply-demand dynamics and pricing logic.”

In 2025, lease renewals increasingly dominated the Grade A office market, reinforcing heightened tenant bargaining power. In the investment market, overall transaction volume declined significantly this year, while investor interest in commercial retail assets rose in the fourth quarter. The prime retail market faced constrained demand recovery, with widening performance divergence placing greater emphasis on asset-level operational capabilities. The industrial market underwent a deep adjustment under the dual pressures of concentrated new supply deliveries and persistently weak end-user demand. Despite facing challenges of declining prices and slow revenue recovery in the second half of 2025, the hotel market remains optimistic about demand growth.

Note: The vacancy rate calculation excludes owner-occupied projects across the city.

Overall demand remained subdued, with tenants increasingly viewing relocation as a high-cost burden rather than a strategic opportunity. Most occupiers opted for lease renewals or downsizing within existing buildings to avoid one-off expenses such as fit-out and reinstatement. As a result, renewals dominated transaction volume, while landlords prioritised occupancy over rent and increasingly offered lease restructuring solutions. Within non-renewal transactions, medical aesthetics and health check-ups, along with AI application firms, emerged as new sources of incremental demand.

Vacancy dipped slightly as net absorption remained modest amid ongoing supply digestion. The overall Grade A office vacancy rate declined by 0.3 percentage points q-o-q to 15.2% by end-December 2025, marking a marginal improvement despite weak demand conditions. This decline was supported by selective leasing activity in core submarkets, with total net absorption reaching 21,790 sqm, slightly lower than the previous quarter. CBD and Wangjing recorded relatively stronger take-up, primarily driven by aggressive rental concessions. Although no new large-scale supply entered the market in 4Q25, approximately 700,000 sqm is expected to be completed in 2026, making the current destocking phase critical for landlords to stabilise occupancy ahead of the next supply wave.

Rental adjustments continued to deepen as pricing transparency increased across the market. Tenant bargaining power reached an all-time high, with initial rental quotes becoming more closely aligned with achievable transaction levels. Average monthly rents declined by 5.6% q-o-q and 16.3% y-o-y, reaching RMB 210 per sqm across Beijing’s Grade A office market. Citywide rental declines are expected to moderate over the next 12 months, with average Grade A office rents forecast to fall by 6.6% in 2026. This slowdown reflects partial stabilisation in occupancy across select submarkets. However, downward pressure is expected to persist as new supply enters the market. According to Michael Zhang, Senior Director of Office Leasing Advisory for JLL Beijing, “While the pace of rent adjustment is expected to ease, the market will remain tenant-favoured, with occupancy preservation continuing to outweigh rental growth as the primary landlord objective.”

In 2025, transaction activity in Beijing’s commercial real estate market slowed, with momentum further weakening in the fourth quarter. Total large-scale transaction volume for the year amounted to approximately RMB 18 billion, a sharp 58% decline compared to last year and roughly half of the five-year average. Retail assets remained relatively more attractive to capital. According to media reports, in Q4, Ingka Centres announced a strategic partnership with GoHigh Capital to establish a real estate fund, which will co-own three of its Livat meeting places, including the Beijing Livat mall. Ingka will continue to manage and operate the above-mentioned assets. The transaction’s progress and implementation will be closely watched.

China has expanded the eligible underlying asset scope of its public REITs program to include office and hotel properties. The China Securities Regulatory Commission (CSRC) and the National Development and Reform Commission (NDRC) successively issued new measures in the quarter, including Grade A and International Grade A office buildings located in mega and large cities, as well as four-star and above hotels, into the pilot program. This move is expected to enhance market liquidity for these assets, promote the revitalization of existing assets, and alleviate liquidity pressures for certain asset holders. Jessie Xu, Operations Director of China and Head of Capital Markets North China, JLL, commented, “The further expansion of China’s public REITs market will accelerate the transformation of the commercial real estate industry toward a refined asset management model and bring a liquidity premium to core-location assets with resilient operational performance."

Note: Prime Retail refers to the Urban market.

Weak consumption constrained brand expansion, although segments driven by emotional value continued to perform. Total retail sales of consumer goods recorded negative growth in 2025 (down 3.1% YTD), prompting brands to adopt a generally cautious approach to store expansion and increasing surrender pressure across traditional sectors. Meanwhile, fast food, IP-driven consumption, ACG and outdoor apparel continued to attract strong footfall, reflecting consumers’ growing preference for emotionally engaging and experience-led offerings amid heightened price sensitivity.

New supply was heavily concentrated in the first half of 2025, with a notable slowdown in pipeline deliveries during the second half. Total new supply in 2025 exceeded 800,000 sqm, approximately half of the 2024 total but still slightly above the 2022–2023 average — signalling a more rationalised supply pipeline. Notably, 360,000 sqm was delivered in Q2 2025 alone, all within the core market. Prime projects such as Daji Uni Elite and ZGC Art Park achieved high occupancy upon opening, supported by precise positioning and strong leasing capabilities. In the second half of 2025, deliveries contracted sharply and were largely located in suburban markets, creating a buffer for the absorption of existing stock within the urban market.

Downward pressure on rents intensified, while operational capability emerged as the key driver reshaping asset value. With tenant budgets tightening and market competition intensifying, net effective rents in the urban market declined by 2.5% q-o-q by end-2025. Leading projects accelerated tenant-mix adjustments to sustain occupancy and enhance customer experience, while non-core assets were forced concede further on rents and commercial terms, widening the performance divergence across the market. “Looking ahead to 2026, a substantial recovery in consumer confidence will depend on broader macroeconomic stabilisation alongside improving household income expectations,” said Ji Ming, Senior Research Director for JLL North China. “Core assets with superior locations, clear customer positioning and strong operating capabilities are already leading the market to a floor through brand refreshes and tenant mix restructuring. Efficient operations and sharp market insight will drive Beijing’s retail market into a new era.”

Leasing demand was dominated by cost-driven relocations, with new expansion momentum remaining notably insufficient. As consumption recovery stayed muted and corporates intensified cost controls, tenants’ appetite for new leases and expansions remained weak. Leasing activity primarily consisted of cost-driven relocations, led by 3PLs, retail and pharmaceutical occupiers. Despite the overall softness, Pinggu attracted several large-scale commitments from top-tier occupiers due to more competitive rents and high-specification warehousing. In contrast, traditional submarkets continued to face pressure to destock.

Rents remained under sustained downward pressure throughout 2025, narrowing price gaps across submarkets. The Beijing logistics market recorded a 4.3% q-o-q decline in rents in 4Q25. Under current conditions, landlords in core submarkets broadly offered deeper discounts and more flexible commercial terms to maintain occupancy rates. As rents continue to adjust and Pinggu delivers high-quality space at attractive pricing, some tenants previously considering Tianjin or Langfang are showing signs of returning. Ji Ming noted, "Demand from automotive manufacturing and pharmaceutical sectors is expected to gradually materialise, supporting stabilisation in core submarkets. Landlords are also adopting more effective strategies, such as phased launches and property upgrades, which should help underpin market recovery over time.”

In the second half of 2025, Beijing’s upscale hotel market continued its downward trend compared to the same period last year. By the end of October, the Average Occupancy Rate (OCC) across the city’s upscale hotels remained broadly in line with the previous year, while Average Daily Rate (ADR) and Revenue per Available Room (RevPAR) fell by more than 4%.

On the demand side, the combined effect of the National Day and Mid-Autumn Festival holidays generated significant momentum, driving growth in both tourist arrivals and tourism revenue. Inbound tourist arrivals and international tourism revenue saw notable increases, with particularly strong activity from travellers originating in Russia, South Korea, Australia, New Zealand, and Southeast Asia. Revenue from commercial performances across the city doubled year-on-year, with cultural and performing arts events emerging as another major driver of local accommodation demand. The year of 2025 saw the signing of several major cultural tourism projects, including the Mars Sci-Fi City and the Ferrari World Entertainment Complex. These developments are expected to attract substantial leisure and business travel flows in the future, further solidifying Beijing’s leading position in the national tourism market.

In the second half of 2025, Beijing welcomed five new upscale hotel openings, adding a total of 1,505 guest rooms — marking a significant increase in supply compared to 2024. The expansion further matures the upscale and luxury hotel landscape in the city’s urban core. Over the next two years, the market will see a gradual increase in new supply, including several landmark luxury hotel projects. Once delivered, these projects will further enrich the market’s brand diversity.

Looking ahead, the issuance pathway for hotel Real Estate Investment Trusts (REITs) is becoming increasingly clear, further accelerating the performance recovery of hotel assets. Asset holders are placing greater emphasis on asset operations and cash flow performance, laying the groundwork for the financialisation of hotel assets. The hotel asset transaction market is entering a phase of rational price adjustments, with market conditions shifting into a “buyer's window.” Meanwhile, global capital flows will continue to influence asset values.

Tony Liang, Senior Vice President of JLL Greater China’s Hotel and Hospitality Group, said, “Despite facing challenges of declining prices and slow revenue recovery in the second half of 2025, Beijing's hotel market remains optimistic about tourism demand growth, driven by continuous optimisation of guest source structure and evolving consumption power. The path for hotels to serve as underlying assets for REITs is becoming increasingly clear. To meet listing requirements, asset owners will place greater emphasis on optimising asset management and operating cash flow, ultimately forming a closed-loop hotel investment cycle encompassing ‘financing, investment, construction, management, and asset exit.’ This will enhance the liquidity and financial leverage capacity of high-quality assets. Moreover, the gradual development of hotel asset securitisation will also compel asset holders to continuously focus on long-term asset value and sustained, stable performance capabilities. Simultaneously, it will provide new investment opportunities for investors.”