Beijing, 8 July 2021 – “Office and retail leasing demand recovery further progressed as the first half of the year drew to a close, encouraging a number of market stakeholders to hold a more confident view,” said Julien Zhang, Managing Director for JLL North China. “More than a year after the height of Covid-19 in China, some top landlords even considered raising expectations, targeting growth in the latter half of the year.”

In the office market, domestic companies continued to be active as leasing demand further rebounded, helping to push down the overall vacancy rate. Investors remained active and closed the largest single deal for the Beijing investment market in recent years. Meanwhile, luxury retailers actively opened new stores at high-profile malls as multi-brand stores expanded quickly, introducing multiple locations across the city. Logistics demand remained stable, benefiting from pandemic-related and seasonal demand. Supported by a large amount of supply, luxury apartment sales soared, but price growth held largely flat. 

Pandemic-related and seasonal demand supported steady leasing activity in the quarter. Increased cold-chain storage demand from biomedicine and fresh supermarket industries was observed as ongoing vaccine campaigns continue and residents have grown accustomed to ordering daily goods online. E-commerce tenants also generated seasonal demand in the quarter, helping to further drive overall market activity. A number of retailers signed short-term leases to meet additional demand anticipated from the 6.18 online shopping festival.

Rents recovered modestly faster than previous expectations in the quarter. Overall market rents grew at a slightly quicker rate, rising 1.3% q-o-q. Many landlords used pocket vacancies to raise rents, especially for short-term leases. As demand recovery momentum continues and the market remains stable, rent growth is expected to continue rebounding at a slightly faster rate compared to previous expectations. “Mainly due to disruptions and recovery from Covid-19, many landlords were reluctant to adjust rents upward over the last year or so,” said Mi Yang, Head of Research for JLL North China. “However, with strong feelings in the market that things have largely returned to normal, we expect to see an increased number of landlords actively chasing higher rents by year-end.” 

_{*ADR stands for Average Daily Rate, and is inclusive of service charge. *RevPar stands for Revenue per Available Room}

Anti-epidemic control policies have been eased and large-scale exhibition activities have gradually resumed, and Beijing’s upscale hotel market gradually rebounded in the first half of 2021. The outbreak of the epidemic at the end of last year brought the occupancy rate back to 20%-25% at the beginning of this year. Since March 16th, Beijing has eased the epidemic prevention restrictions, including the resumption of various cultural and tourist activities, the rapid return of business and leisure demand, and the pick-up of upscale hotel performance; large-scale conferences and exhibition activities have gradually returned to normal since April. In the first half of 2021, Beijing's large-scale conference and exhibition activities have gradually returned to normal. A total of more than 70 large-scale exhibitions have been held, returning to the level of nearly 70% of the same period in 2019. Driven by the recovery of the exhibitions, the demand for upscale hotel conferences and exhibitions has also recovered rapidly, further boosting the overall performance. As of May 2021, Beijing’s upscale hotel occupancy rate reached 47.1%, recovered to 65.5% of the same period in 2019; the ADR was CNY 936.3, equivalent to 84.5% of the same period in 2019; RevPAR reached CNY 441.0, restored to 55.3% of the same period in 2019.

The supply of upscale hotels in Beijing remained stable, and the growth rate of supply was lower than that of other first-tier cities. In April 2021, Commune by the Great Wall was renovated and reopened with the Unbound Collection brand, in 2021, Beijing is expected to open another two upscale hotels, bringing 893 guestrooms new supply to the market, accounting for 1.0% of the existing supply in Beijing, which is lower than 4.7% in Shenzhen, 1.7% in Guangzhou and 1.3% in Shanghai. It is worth mentioning that the new supply of Beijing Marriott Hotel Yanqing is located near the Winter Olympics area and will guarantee room supply for one of the three major venues of the 2022 Beijing Winter Olympics.

The opening of Universal Studios and the hosting of the Winter Olympics will benefit Beijing’s upscale hotel performance growth. Beijing Universal Studios is about to enter the trial operation stage. According to the official estimation, the first phase will receive 12-15 million visitors per year. After the completion of the project, the annual number of tourists will exceed 30 million, which will greatly benefit the growth of demand for leisure tourism in Beijing, and will also play a certain role in profiting the growth of upscale hotels. In the medium and long term, the Beijing Winter Olympics will be held in February 2022. It is expected to bring increases in both leisure and group visitors to the city, pushing up the ADR and occupancy rate. Tony Liang, Vice President of JLL Hotel & Hospitality Group Greater China, said: "Beijing's upscale hotel performance gradually returned to stability in the first half of the year. In the medium and long term, thanks to stable supply and predictable positive factors in the medium and long term, the overall performance of Beijing's upscale hotels is expected to maintain a good growth trend."