News release

Beijing’s retail market marked a mild recovery whilst office market under pressure but remains resilient

According to JLL Beijing’s 2Q23 Property Market Review

July 05, 2023

Kyrah Cheng

Head of Marketing, North China
+86 10 5922 1385

Andrey Yang

+86 (10) 5922 1382

Beijing: 5 July 2023 – With the second half of 2023 kicking off, the performance of Beijing’s commercial real estate market was slightly differentiated as the city’s economy is in the process of achieving steady recovery. “Although the current challenges in the commercial real estate market remain, more positive policy signals along with the previous stimulus from monetary policy are expected to bring an improvement in overall market confidence,” said Julien Zhang, Chief Strategy Officer for JLL China.

In the Grade A office market, leasing demand turned weak and pushed down the overall rents. In the investment market, domestic self-use buyers were the most active during the quarter, while institutional investors continued to focus on apartments, logistics, and business parks. The uptick in F&B leasing demand pushed the prime retail market into a mild recovery with rents stabilizing. The industrial market demand remained solid, but the new supply slightly drove up the city’s vacancy rate. Having achieved a rapid recovery in H1 2023, the hotel market is expected to unleash more energy during the summer peak season. The high-end residential market saw a steady rise under the influence of accommodative policies, with the transaction volume increasing by 48% in the quarter.

Grade A Office
Office 2Q23
Vacancy 10.3%
New Supply 0 sqm
Rental Growth -1.8% q-o-q

As leasing demand weakened, overall rents declined further in the tenant-favourable market. The demand recovery trend since the beginning of this year did not continue, leaving soft leasing demand in this quarter. Tenant relocation demands were constrained by low budgets. Meanwhile, a longer negotiating period was also observed, especially for large leasing demand above 1,000 sqm. The industry distribution of leasing transactions was more diversified. TMT industry tenants contributed one-quarter of the total leasing volume, and among them, gaming companies showed notable momentum. Across the city, the number of enquiries and site visits dropped significantly even in the previously stable CBD area, where landlords continued to provide more flexible strategies to attract potential tenants.

The overall vacancy rate compressed slightly to 10.3%, with overall net absorption decreasing by one-third compared with 1Q23. Although the space surrendering trend faded out in the quarter, softening leasing demand still resulted in limited net absorption citywide. Landlords were under great vacancy pressures due to the slower-than-expected backfilling pace. The downward trend of Grade A overall rents continued, reporting -1.8% q-o-q growth and -4.0% y-o-y growth. Given current market environment, landlords started to provide considerable rental discounts even for small-sized demand under 500 sqm. “The rental adjustment period is expected to continue till 2024. Overall Grade A rents will further decrease in the next several quarters as market pressures remain,” said Michael Zhang, Senior Director of Office Leasing Advisory for JLL Beijing. “Tenants are expected to leverage the market environment to bargain for more favourable leasing terms.”


The investment market in Beijing this quarter was dominated by domestic buyers’ self-use demand, with transactions mainly located in areas outside of the Fifth Ring Road. Leading home furnishings company Easyhome recently announced their plan to acquire Ocean We-Life Plaza, a retail property in the Olympic area on the North Fourth Ring Road with a total GFA of approximately 60,000 square meters for a total purchase price of RMB 1.96 billion.

While self-use demand was the most active in the market, properties including apartments, business parks, and logistics continued to attract investors’ attention. Investment demand towards office properties has been weaker recently due to the poor performance of the office leasing market. “Fewer power plays were seen at the seller side recently, but overall investment confidence is still pending for a recovery,” said Jessie Xu, Operations Director of China and Head of Capital Markets North China, JLL. “C-REITs-related assets are attracting much attention from investors. The market expansion of C-REITs is expected to push up the investment activity of such assets.”

Prime Retail
Office 2Q23
Vacancy 6.2%
New Supply* 301,700 sqm
Rental Growth -0.7% q-o-q

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

Sizeable leasing transactions from F&B sector lead to booming demand. Total retail sales grew 29% in May, which had a positive impact on retailers’ outlook for expansion. Among them, F&B retailers have efficiently responded to the recovery in consumer demand by committing to new store openings, accounting for 49% of the newly leased area in Beijing during the quarter. Meanwhile, children’s education and entertainment retailers started to recover and previously surrendered spaces were gradually absorbed in 2Q23.

Largest quarterly new supply enters Suburban market since 2018. In the second quarter of 2023, three new projects opened in the Suburban market with a sum area of 301,700 sqm, making it the largest quarterly supply since 1Q18. With high commitment rates from new projects and increased demand in the market, Urban and Suburban markets both saw a vacancy rate decrease, registered at 6.2% and 8.0%, respectively. All of the new projects have been developed by major market players, such as COFCO, Sino-Ocean Group and China Resource Land. With the well-planned market positioning and tenant mix, these new projects achieved remarkable operational performance.

Overall rent level enters rebound pathway. The resurgence in foot traffic and the growth in consumer spending have significantly improved landlords’ confidence. Some landlords at leading projects raised their rental rates, especially for their newly-signed F&B leases, while some landlords started testing the waters with slight increases in asking rents, aiming to adjust their rents up to the 2021 levels. In the quarter, Urban rent increased by 0.7% q-o-q, while Suburban rent rose by 0.6% q-o-q. The Beijing retail market may be at a turning point, ending a three year-long cycle of declining rents, despite fluctuations.

“By the end of 2023, rent growth rates in Core and Urban markets are forecast to be at 1.5% y-o-y and 2.0% y-o-y, respectively. Overall rent is expected to return to the 2021 level by the end of 2024.” said Ji Ming, Research Director for JLL North China.

Industrial 2Q23
Vacancy 7.1%
New Supply 78,000 sqm
Rental Growth -0.5% q-o-q

Demand was solid, but vacancies rose slightly due to supply side pressures. Leasing demand remained stable, with several new leases of over 5,000 sqm area each were completed in 2Q23. New leasing activities were mainly from logistics, electronics technology and healthcare companies. Demand growth was moderate in the BALP and TLP submarkets, which outperformed other submarkets.

For supply, one new project in the outer suburbs, with a total GFA of 78,000 sqm, entered the market in 2Q23. However, due to its remote location and limited accessibility, absorption performance at the new project was unsatisfactory. Thus, the vacancy rate increased slightly by 0.8 ppt to 7.1% in 2Q23.

Overall rents were relatively stable, with a 0.5% q-o-q decline in 2Q23 and an annual growth of 3.2% y-o-y. The majority of projects continued to show stable rent growth. In particular, projects in the mature submarkets that were nearly fully occupied increased their rent levels aggressively. However, the Daxing submarket has been experiencing downward pressure on rents due to low-price competition from new completions in nearby Langfang. Some landlords in the Daxing submarket have chosen to lower their rents to avoid losing tenants to Langfang.

“Due to the postponement of two projects scheduled to enter the market this quarter, supply pressure is expected to increase in the second half of 2023,” said Mi Yang, Head of Research for JLL North China. “As nearly 300,000 sqm of new supply will enter the market in the next two quarters, the vacancy rate will be pushed up to around 10.2% in 2023, an increase of 4.4 ppts from 2022. A more modest pace of rent growth is anticipated due to the large supply.”

Hotel* YTD May 2023
Occupancy 62.1%
ADR* 1,070 RMB
RevPAR* 665 RMB

Note: *Hotel refers to the upscale hotel market. *ADR stands for Average Daily Rate and is inclusive of service charge. *RevPAR stands for Revenue per Available Room

Beijing’s tourism market saw a full recovery in H1 2023, as evidenced by promising tourism data in festivals. The number of international arrivals lagged significantly, while the outbound willingness of domestic tourists is getting strong. According to data from the Beijing Municipal Culture and Tourism Bureau, during the Dragon Boat Festival, 216 key tourist attractions (areas) received a total of 5,185,900 visitors, exceeding the 2019 level by 2.1%. The total accumulated business income was RMB 309.1 million, up 5.8% from the 2019 level. During the same period, 3.96 million people entered and left the country, averaging 1.23 million per day, 2.3 times up over last year’s Dragon Boat Festival and recovered to 64.6% of same period in 2019. Since inbound tourists did not recover, the entry and exit data growth was mainly from outbound tourists.

The Beijing hotel market rapidly recovered in H1 2023, with RevPAR (revenue per available room) reaching 80% of the 2019 level. As of May 2023, the performance of the upscale hotel market in Beijing further improved with Occupancy reaching 62.1%, ADR reaching RMB1,070 and RevPAR rising to RMB 665. The ADR has nearly recovered to the 2019 level, and Occupancy and RevPAR have recovered to approximately 85% of the 2019 level.

There is no new supply of upscale hotels in H1 2023, but an upscale hotel reopening after renovation. No new supply of upscale hotels is expected throughout 2023. The opening of Hyatt Regency Beijing Daxing, originally planned for March 2023, is now postponed to 2025. However, the Swiss Hotel Hong Kong Macau Center (initially opened in 1991), reopened in April 2023 after a four-year renovation and refurbishment, with 467 rooms and suites. The hotel market in China has gradually entered the inventory era, especially in Beijing, with sluggish growth of new supply. Rebranding and renovation or conversion have become new challenges for hotel owners.

Due to the trend of long-distance travel and theme tours, as well as tourism engines that radiate across the country such as Universal Studios, the Beijing hotel and tourism market is expected to unleash more energy during the summer peak season. According to China Tourism Academy’s survey on cultural leisure and tourism consumption during holidays: during the Dragon Boat Festival, the average travel radius of tourists was 164.87 KM, up 52.8% year on year; and the average travel radius of destinations was 12.94 KM, up 71.0% year on year. Compared with the epidemic period, short-distance travel became less popular, but still the basis of local leisure travel. The trend of tourists expanding travel radius will be more prominent during the summer peak season. Domestic long-distance and outbound tours are expected to dominate the summer tourism consumption. In addition to the release of traditional demand, such as student and family travel, popular cultural activities, including concerts, music festivals, drama and special local cultural activities, will further drive tourists’ willingness to travel, pushing up market demand in the hotel industry.

Tony Liang, Senior Vice President of JLL Greater China’s Hotel and Hospitality Group, said, “The travel market achieved a rapid recovery in H1 2023, and the upscale hotel market performance also rebounded rapidly. However, as of May, the overall performance of upscale hotels in Beijing has still not exceeded the 2019 level. With the upcoming summer peak season, the performance of upscale hotels in Beijing is expected to climb further.”

High-end Residential
Luxury Apartments 2Q23
New Supply 0 units
Capital Values Growth -0.7% q-o-q
Rental Growth 0.9% q-o-q

Housing sales rose amid a loose policy environment. A total of 2,048 luxury apartment units were sold in the quarter, up 48.1% q-o-q but down 17.3% y-o-y. Demand recovered at the end of the quarter as credit policies loosened and developers stepped up promotions to boost their mid-year performance, driving sales growth. Mid-year discounts pushed the average price down by 0.7% q-o-q. Active business travel and employment kept translating into leasing demand, driving rents to increase by 0.9% q-o-q.

High-end residential market is expected to remain active, supported by increasing new supply. Supply is expected to gradually increase in the second half of this year. The further release of demand will thereby push up sales. “Under the principle of ‘one city, one policy’, local policy relaxation expectations are expected to strengthen considering the current market situation,” said Mi Yang, Head of Research for JLL North China. “Stable transaction volume brings firm confidence to developers. Driven by active market sentiment, some projects may tighten their incentives, which will drive high-end residential prices to stabilise and rise.”

About JLL

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