News release

Beijing’s office and retail market see peak supply while overall demand recovery remains slow

According to JLL Beijing’s 3Q23 Property Market Review

October 18, 2023

Kyrah Cheng

Andrey Yang

+86 (10) 5922 1382

Beijing: 18 October 2023 – “The current market performance is far from meeting the expectations of all parties, but signs of improved demand are expected to emerge gradually with successive favourable policies,” said Julien Zhang, Chief Strategy Officer for JLL China. “It was observed that all parties in the commercial property market were adopting various strategies to cope with the current situation, but more patience is needed before the market returns to an upward path.”

Demand in the Grade A office market remained constrained in the third quarter, with the fall in rents continuing. Activity in the investment market increased, with Joy City announcing the sale of Beijing COFCO Landmark to China Post Life nearing the end of the quarter. The prime retail market saw a slight contraction in demand for retailer openings due to the slowdown in consumer recovery. Meanwhile, the third quarter saw a peak in supply, with a total of 630,000 sqm of new retail space entering the market. Vacancy levels in the industrial market rose slightly on the back of new supply, while rental levels remained stable in the third quarter. Sales in the high-end residential market stabilised under the impact of the new policy. A small number of properties attracted buyers with more favourable pricing, resulting in a modest q-o-q decline in high-end residential new home prices.

Grade A Office
Office 3Q23
Vacancy 11.1%
New Supply 186,918 sqm
Rental Growth -1.3% q-o-q

The demand downturn continues in Beijing office market, and the expected rent gap between landlords and tenants remains huge.
Leasing demand was soft in 3Q23 and the negotiation periods were longer. Renewals and cost-saving relocations made up the majority of leasing transactions in the quarter. Despite the weak market environment, flight to quality remained a theme as tenants tended to seek high-quality office space, with low budgets. The TMT industry accounted for one-third of the total leasing volume this quarter. Technology firms from certain sub-sectors, such as artificial intelligence and semiconductors, were still generating leasing demand with high rent affordability. Similar to the tenant structure in previous quarters, domestic tenants contributed more than 80% of non-renewal transactions.

The overall vacancy rate was slightly pushed up by the new supplies, up by 0.9 percentage points to 11.1%. Landlords faced heightened vacancy pressure as leasing progressed more slowly than expected. Two Grade A office projects, King Region Saga and North Star Centre, totalling 186,918 sqm entered the market in 3Q23. The supply volume for this quarter was the highest quarterly level since 4Q21, increasing supply pressures in a challenging market environment. Average rents in the Grade A market declined -1.3% on a q-o-q basis and -4.9% y-o-y. Tenants remained cost-conscious, wanting to allocate very limited budgets to office leasing. Landlords must provide further rental reductions to attract tenants. “With few signs of economic relief in sight, we expect further declines in overall Grade A rents until the beginning of 2025. The rental decline in 2024 is expected to be wider than that of 2023,” said Michael Zhang, Senior Director of Office Leasing Advisory for JLL Beijing. “The lower-rent environment as well as policy stimulus are predicted to break the demand dilemma and stimulate more leasing activities in 2024. Tenants will leverage upgrade opportunities with low costs.”


Beijing’s investment market witnessed a rebound in the proportion of office property transactions in the quarter. Joy City listed its COFCO Landmark project for public sale on the Beijing Equity Exchange and announced at the end of the quarter that it had signed an equity transfer agreement with China Post Life, corresponding to a transaction amount of RMB 4.26 billion. In addition, Jianan Building Tower Two, formerly held by China Aoyuan and located in Beijing’s South Second Ring Road, was sold through foreclosure for RMB 3.48 billion.

The growth momentum of investor focus on rental housing continued. Currently, logistics, rental housing, and assets with apartment conversion possibilities continue to receive voluminous attention, with both domestic and foreign investors actively seeking investment opportunities. “Currently, the investment market in Beijing is dominated by self-use demand,” said Jessie Xu, Operations Director of China and Head of Capital Markets North China, JLL. “From an investment perspective, prices at this stage are struggling to meet the return expectations of both buyers and sellers, and the adjustment in market expectations is expected to continue further.”

Prime Retail

Retail 3Q23
Vacancy 6.3%
New Supply 634,292 sqm
Rental Growth 0.9% q-o-q

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

Demand slightly contracts due to slowing consumption growth. Growth in total retail sales contracted in the quarter due to a lack of sustained momentum following the consumption recovery. Retailers’ expectations for store expansions in 2H23 were also affected, leading to a weakening in immediate store opening demand in 3Q23. However, the robust leasing transactions completed in 1H23 continued to be realised as new store openings this quarter, resulting in an increase in net absorption.

New supply of 630,000 sqm launches, highest figure since 2017. Four new projects recorded to open in Beijing, the robust pre-lease demand of 1H23 let to the high opening rates of the new supply. Therefore, the supply peak did not exert significant pressure on overall vacancy rates. The urban vacancy rate increased by a marginal 0.1-ppts to 6.3% compared to the previous quarter. Meanwhile, the suburban vacancy rate fell by 0.5-ppts to 7.5%.

Overall rent recovery momentum continues. The rental growth rate in the urban market recorded as 0.9%, increased by 0.2-ppts q-o-q. Rental increases of the leading projects in the previous two quarters slightly drove up the rental level for their nearby projects in this quarter. Vacancies in projects in the suburban market were steadily absorbed but due to the homogeneous competition of the supply wave, rent growth slowed. Rental growth in the quarter was 0.3%, down 0.3 ppts compared to the previous quarter, but remained positive. “In the next quarter, 710,000 sqm of new supply is expected to enter the Beijing retail market. Some upcoming projects in the suburban area are under pressure on pre-leasing pressures, while the vacancy level to slightly push up at the end of the year.” said Ji Ming, Research Director for JLL North China.


Industrial 3Q23
Vacancy 9.3%
New Supply* 119,000 sqm
Rental Growth 0.2% q-o-q

Demand was solid, yet the new completion contributed to a vacancy increase.
Leasing demand remained stable, with several new leases of over 10,000 sqm area each completed in 3Q23. New leasing activities were mainly from logistics and e-commerce companies. Affected by China’s pharmaceutical anti-graft campaign, demand from healthcare companies weakened this quarter. For supply, one new project, with a total GFA of about 119,000 sqm, entered the market in 3Q23. The new project has recorded very few pre-leasing deals because of its relatively remote location and limited accessibility. Due to the weak performance of the new project, the overall vacancy rate increased by 2.2 ppts to 9.3% in 3Q23.

Overall, rents were relatively stable, with a 0.2% q-o-q increase in 3Q23. The majority of the projects maintained their rents, while a few projects that were nearly fully occupied showed stable rent growth. Although Beijing’s logistics market remained relatively stable in 3Q23, tenants were more rent-sensitive due to the slow recovery of the economy. Affected by cautious market sentiment, landlords may start adjusting leasing strategies to maintain occupancy levels in the future.

“Supply pressure on the market will be significantly lessened in 2024,” said Mi Yang, Head of Research for JLL North China. “The volume of new supply in 2024 is only 25% of that in 2023. The vacancy rate is expected to drop to 4.8%, a decrease of 4.5 ppts from 2023. However, as pre-leasing activity for the 1.48 million sqm of new supply entering the market in 2025 in Pinggu District will begin in 2024, these new projects with lower rents will compete significantly with existing projects. A more modest pace of rent growth is anticipated, affected by pre-leasing activity.”

High-end Residential

Luxury Apartments 3Q23
New Supply 1,625 units
Capital Values Growth -0.9% q-o-q
Rental Growth -0.2% q-o-q

Pent-up demand released in the short-term under policy incentives.
A total of 1,423 luxury apartment units were sold in the quarter, down 30.5% q-o-q and 16.7% y-o-y. In the first half of the quarter, sales continued to decline due to low supply and strong market wait-and-see sentiment. A new policy in early September was effective in stimulating onlookers to enter the market and helped stop sales from falling and stabilise. Larger discounts have been offered on a small number of housing units in projects that experienced sluggish sales in the early stages, in the hope of seizing the positive-policy window and accelerating the pace of sales and capital turnover, pushing the average price down by 0.9% q-o-q. The transaction volume declined in the off-season. The increase in the number of listings has prompted some landlords to increase leasing flexibility to shorten the vacancy period, driving down rents by 0.2% q-o-q.

Rules may ease further; demand and supply will be stable. Developers are more willing to launch projects with the onset of the traditional peak sales season of October. The entry of new projects will continue to drive demand release. “With the introduction of the new policies, more homebuyers in need of improvement are expected to enter the market, pushing up high-end residential sales,” said Mi Yang, Head of Research for JLL North China. “As market confidence and demand recover, high-end residential prices will gradually stabilise in the short term. Given that the supply and demand structure of the high-end residential market has not changed, prices should still show growth momentum in the mid to long-term.”

About JLL

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