Beijing: 10 April, 2025 – “During the first quarter of 2025, the coordinated efforts of a nationwide ‘proactive fiscal policy’ and a ‘moderately loose’ monetary policy provided a significant boost to the Beijing commercial real estate market. In the office market, the demand has been driven by upgrades and relocations of existing tenants, with popular sub-sectors within TMT industry actively expanding,” said Rayman Zhang, Managing Director for North China, JLL. “The targeted approach of this policy combination is expected to progressively enhance market liquidity while effectively activating the market's inherent dynamism.”

Driven by rental adjustment strategies, the Grade A office market experienced a marginal increase in demand during the first quarter of 2025. In the investment market, rental housing continued to present compelling opportunities, attracting the attention of both domestic and international investment institutions. Despite current pressure on rents in the prime retail market, the overall vacancy rate in the city remained steady, primarily due to a reduction in new supply. In the industrial market, although rents continued to decline, there was a notable increase in market transactions compared to the previous quarter. Taking into account the prevailing market circumstances, some upcoming logistics projects opted for a phased launch approach in order to mitigate the effects of significant new supply. Furthermore, the high-end residential market witnessed a revival in demand, accompanied by a significant surge in transaction volume compared to the corresponding period of the previous year.
 

Demand from self-use buyers remains robust. During the first quarter, Enlight Media made an official announcement revealing its plan to spend RMB 1.2 billion on the acquisition of the standalone Aolin NEO office building situated on the North Fourth Ring Road. This move was aimed at fulfilling the company’s corporate office needs. Notably, Aolin NEO — which previously housed Jiahe Supermarket — underwent a thorough transformation and upgrade following its acquisition by Hitone Capital in 2022.

Beijing’s rental housing sector remains a strong magnet for both domestic and foreign investments. Ziroom and Invesco Real Estate’s joint-venture apartment asset management platform recently announced its inaugural project in Shijingshan District with a total investment of approximately RMB 1.2 billion. The project was previously held by China Overseas Property as a commercial development site. According to Jessie Xu, Operations Director of China and Head of Capital Markets North China, JLL, “The partnership between a prominent rental housing operator and a globally recognized investor is undoubtedly breathing new life into the market. This deal underscores foreign investors' long-term confidence in China’s housing rental market potential and is likely to draw more diverse investments into the country.”
 

Note: Prime Retail refers to the Urban market.

The lack of consumer confidence continues to weigh on leasing demand. According to data released by the Beijing Municipal Bureau of Statistics, the consumer confidence index has been in decline since the second half of 2024 and has yet to recover to high levels. This led to vacancy pressure in some retail projects and more cautious retailer expansion strategies, however cost-effective F&B retailers and ACG formats providing emotional value demonstrated strong resilience in the sluggish market. These two categories accounted for 43.1% of total new store openings in Beijing’s retail market during 1Q25, becoming major demand drivers for vacant space absorption.

Supply moderates while vacancy rates stabilize. Only 50,000 sqm of new supply entered suburban markets in 1Q25, with no new projects in urban areas. The significantly slower supply pace created favourable conditions for absorption of existing vacancies, and most landlords effectively maintained occupancy rates through flexible strategies including rent reductions and customized leasing terms. The urban vacancy rate edged up a mere 0.4 ppts q-o-q to 5.6%, remaining within a healthy range.

Landlords actively respond with various measures as the market experiences a downward trend. Facing weakening demand, landlords widely adopted flexible leasing strategies including renewal discounts, short-term lease adjustments, and extended rent-free periods to stabilize occupancy. This led to a 2.0% q-o-q decline in effective rents in urban markets during 1Q25. The 2025 National People’s Congress has allocated RMB 300 billion in ultra-long-term special treasury bonds for consumption stimulus, doubling the 2024 fiscal commitment. “The new stimulus policy package announced during the 2025 ‘two sessions’ is expected to spur initiatives that boost consumer spending and leverage a steady recovery in leasing demand. As policy effects take time, landlords are likely to offer more appealing leasing strategies to attract tenants. Rents are predicted to remain on a downward trend throughout the year, with Urban rents forecast to decrease by 7% y-o-y,” said Ji Ming, Research Director for JLL North China.
 

Rental price discounts trigger a leasing transaction volume bounce. Several projects were able to sign new leases of more than 5,000 sqm in 1Q25 through significant price reductions. Prices considerably below average market rents stimulated the relocation of tenants from low-standard projects to Grade A projects. However, as tenants remained highly sensitive to rental discounts, the Beijing logistics market continued to lose large-area tenants to lower-priced Tianjin and Langfang, with the resulting surrender and downsizing continuing to weigh on demand. On the supply side, two new projects in the Pinggu submarket with a total GFA of 355,750 sqm entered the market in 1Q25. Both new projects recorded very few pre-leasing deals due to their relatively remote locations, leaving them with vacancy rates above 80%. The overall vacancy rate increased by 7.0 ppts to 25.2%.

Rents continue to decline at a faster pace. Overall rental declines continued to accelerate in 1Q25, down 2.8% q-o-q and 7.3% y-o-y. A soft leasing market combined with large new supply heightened market competition, prompting some landlords to offer significant rental discounts to facilitate transactions. “New supply pressure in 2025 should be lower than previously expected,” said Ji Ming. “Individual landlords in the Pinggu submarket actively adjusted their supply strategies in 1Q25 based on the soft leasing market, dividing the entire project into multiple supply phases and delaying the entry of some of these phases to 2026.” In an increasingly competitive market, more landlords are likely to realize that direct significant rent reductions are the only effective way to trigger deals. Rents are expected to decline by a significant 8.5% in 2025, the lowest level in a decade.