News release

Office rents record a mild decline as retail struggles amid Omicron outbreak; investment activity drops slightly

According to JLL Beijing’s 2Q22 Property Market Review

July 05, 2022

Kyrah Cheng

Andrey Yang

+86 (10) 5922 1382

Beijing: 5 July 2022 – “Beijing is under short-term pressure due to the recent Omicron outbreak, but the market fundamentals have not been substantially impacted,” said Julien Zhang, China Chief Strategy Officer and Managing Director for North China, JLL. Grade A office market saw a pause in leasing activities and rent growth turned negative again. The investment market is relatively quiet; meanwhile, Sino-Ocean sold Rayzone for five billion RMB. The prime retail market was more significantly hit by the virus outbreak as leasing activities were almost fully interrupted. The leasing demand for the logistics market continues to hold strong and rents rose further. In the hotel market, the supply of upscale hotels in Beijing will grow steadily in 2022. In the high-end residential market, the transaction volume reached a record high in the quarter with new unit prices continuing to rise.

Grade A Office
Office 2Q22
Vacancy 9.8%
New Supply 0 sqm
Rental Growth -0.2% q-o-q

The office market stagnated in the second half of the quarter due to a sudden outbreak of Covid-19 in Beijing. Demand for the Beijing office market stagnated in the second half of 2Q22. The total net absorption recorded approximately 47,000 sqm – down two-thirds from the quarterly net absorption in 1Q22. A majority of deals under negotiation were pending due to the strict constraints on decoration and attendance rates in office buildings. The relocation as well as expansion demand from finance and TMT sectors contributed more than half of the leasing activities in the quarter. Also, the 9,000 sqm relocation demand from a domestic company in the culture industry was the only sizable deal over 3,000 sqm in 2Q22.

In 2Q22, the decline of overall vacancy rate narrowed compared with the previous quarter. Due to the stagnant demand in office market, the decline in overall vacancy rate recorded 1.1 ppts smaller than that in the previous quarter, sliding 0.4 ppts to 9.8%. Sizable transactions were limited in the quarter as uncertainties due to the Covid-19 affected potential tenants’ decision-making processes. The decrease in vacant space was largely supported by transactions of less than 2,000 sqm, which accounted for nearly 70% of the total transaction volume. Meanwhile, overall rents returned to negative growth in 2Q22, down -0.2% q-o-q, but were up slightly y-o-y by 0.5%, mainly due to the strict controls due to Covid-19, which obstructed the normal functioning of the leasing market. Four of all nine submarkets across the city reported negative rent growth. “In view of the multi-dimensional negative impact of the sudden Covid-19 and other objective factors on the office market, we remain on the sidelines of the rental trend in 2022,” said Michael Zhang, Senior Director of Office Leasing Advisory for JLL Beijing. “Landlords are actively adjusting their leasing strategies to maintain rental stability of projects and the market will not see huge drop in rents in the short term.”


Investment momentum was stable, with core assets continuing to attract attention during challenging times. Sino-Ocean sold the well-known project, Rayzone, in Lize to Ping An Life for RMB 5.01 billion. CMC REIT approves the acquisition of a 46.41% stake in Onward Science & Trade Centre, an iconic property located in Chaoyang District. In addition, Golden Union Assets completed the acquisition of Royal Phoenix Hotel adjacent to the East Second Ring and plans to transform it into a rental apartment demonstrating investors’ preference for properties with upgrading and value-add potential.

The resurgence of Covid cases in multiple cities caused the investment market to feel short-term pressure. The total transaction volume in 1H22 was RMB 10.08 billion, less than half of the level seen in 1H21. Despite the market uncertainty, investors remain confident in Beijing’s long-term prospects while making more cautious decisions. “Short-term fluctuations have limited impact on forward-looking investors. As the traffic restrictions are gradually lifted, market sentiment and activity are expected to pick up soon,” said Jessie Xu, Operations Director, China and Head of Capital Markets, North China, JLL. “While investors have a major focus on rental housing, logistics, and data centres, their attention to office core assets may rise once the market sentiment picks up.”

Prime Retail
Office 2Q22
Vacancy 6.1%
New Supply* 151,900 sqm
Rental Growth 0.7% q-o-q

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

The disruption caused by the latest Covid outbreak hit the retail market heavily, the disruption of retail activities caused sharp declines in traffic flow and retail sales, with overall retail sales growth declining by 26% y-o-y in May. F&B tenants were among the hardest hit as overall retail sales from F&B sector tumbled by nearly 55% y-o-y in May. Driven by the rising operation pressure, more than 60% of surveyed closed stores were F&B brands. Shopping malls had resumed operations after the suspension of retail activities in May, however the recovery was slow, with top malls recovering less than 60% of the traffic flow before the outbreak. Meanwhile, fast fashion brands continued to shrink offline presence amid a challenging offline market. For example, Selected announced it will close all offline stores by end of July; tens of which are in Beijing.

Two new projects opened in the quarter. Yaojiayuan MixC, renovated by China Resources, opened in late April with a nearly full commitment rate. The project targets family customers in the nearby region through its nearly 30 children-oriented brands, differentiating itself from nearby popular Chaoyang Joy City which targets young customers. Chang’an Mills Mall, located in Shougang Park which hosted Beijing Winter Olympics, opened in 2Q22. The shopping centre attracted 14 brands for their debut appearance in West Beijing, including multiple NEV brands. This project is expected to significantly increase the quality of retail offerings in Suburban Shijingshan area and to further boost spending in Shijingshan District. 

Rental growth turns negative following a sharp decline in leasing demand. Landlords offered rent concessions on new leases under increasing vacancy pressure, while providing support to current tenants by lowering rents and offering rent-free periods in order to stabilise their projects Urban rents recorded a moderate decline, registering -0.7% q-o-q growth while Suburban sub-market recorded a sharper decline, recording -1.3% q-o-q growth.

 “Considering the uncertainties about Covid resurgences, many brands paused or cancelled expansion plans that were previously planned for the year. We expect to see a continuous decline in overall leasing demand throughout the second half of the year. Under rising vacancy pressure, landlords have already adjusted down rental expectations for the year and are expected to provide greater flexibility on terms, putting downward pressure on rental growth,” said Ji Ming, Research Director for JLL North China.

Industrial 2Q22
Vacancy 4.1%
New Supply* 0 sqm
Rental Growth 1.3% q-o-q

Demand from e-commerce and biomedicine sectors continue to grow. In the environment of ensuring the distribution of daily necessities during the Beijing Covid-19 wave, the demand for fresh supermarkets and from the logistics industry remained steady, coupled with expansion in online retail and biomedicine which continue to grow. Therefore, the demand for cold storage has increased, and the scale of cold storage retrofits in the market has extended. In addition, due to the lack of market supply, the existing demand has begun to integrate warehouse units through lease expansions, and some projects are now dominated by large tenants, further stabilising leasing activities. Also, with the market jointly affected by scarcity of new supply, vacancy rate drops to 4.1% in the quarter.

Enterprises with low-price sensitivity boost rent increases; the market’s average rent has grown positively at 1.3% q-o-q from last quarter. Large-scale cold storage retrofits for mature, developed projects in high-quality regions increased the scarcity of ambient (natural temperature) warehouses, leading to rent increases. Meanwhile, the tenant demographic in major sub-markets close to urban areas has been upgraded and is gradually being replaced by more stable companies with more leasing power; therefore, the rent price has increased. “Development in market fundamentals is improving high-end demand,” said Mi Yang, Head of Research for JLL North China. “In 2022, the market supply is expected to increase by 290,900 sqm, and the projects that have started the pre-leasing phase are all promising good performance. In the future, there will be more demand for projects with customised warehousing as net absorption increases. It is forecasted that the vacancy rate will not exceed 6% before end-2022.”

Hotel* YTD May 2022
Occupancy 29.5%
ADR* 1,061 RMB
RevPAR* 313 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

During the 2022 Winter Olympics, Beijing’s main submarkets’ hotels outperformed their 2019 comparable. Benefiting from the Winter Olympics and Spring Festival, the RevPAR of Beijing’s upscale hotel market in February recovered to 87.6% of the same period in 2019. From February 4 to 20, the Winter Olympics attracted increased demand for hotels, especially those with Olympics-related group contracts in Beijing. Although the Winter Olympics were open only to a select group of invited spectators, from a week before the start to a week after the closing, Beijing's key submarkets (Beijing Olympic North Park, Yansha, CBD, and Wangfujing) surpassed the RevPAR in 2019 to varying degrees. Among all key submarkets, Beijing Olympic North Park increased by over 100% compared to the same period in 2019. After the closing ceremony, some Olympic venues, such as the Shougang Park, are emerging as new tourism demand generators in the city.

In the first half of the year, the overall performance of high-end hotels in Beijing was still sensitive to the pandemic. Since March, the pandemic in other first-tier cities resulted in the tightening of Beijing’s entry and exit policies, significantly impacting MICE and business demand in the hotel market. During this period, Beijing hotel performance relied mainly on the leisure demand of residents. As a result, the RevPAR of upscale hotels in Beijing fell by 46.1% MoM in March. In April and May, with the pandemic outbreak in Beijing, RevPAR declined by 26.7% and 34.2% MoM respectively.

The supply of upscale hotels in Beijing will grow steadily in 2022. One Luxury hotel, Shangri-La Shougang Park, which opened in the Shijingshan district, has added 283 rooms to the market. In addition, Beijing Wild Goose & Pine Hotels and Resorts is expected to open this year, adding 67 new rooms to the market. Located on the north shore of Yanqi Lake, Beijing Wild Goose & Pine Hotels and Resorts is one of the key projects for expanding and enhancing the area’s status as a key venue for international conferences, according to the Huairou District Government.

In addition to traditional demand, short-distance travel is becoming a consumer habit. With the implementation of the “dynamic zeroing” policy, short-distance travel has become more feasible and convenient, and the leisure demand of the residents has brought opportunities for the urban and suburban hotel market in Beijing.

Tony Liang, Senior Vice President of JLL Hotels & Hospitality Group, Greater China, says, “In the context of normalized epidemic prevention, short-distance travel may have become one of the market demand growth points. The current environment creates conditions for the development of suburban travel and urban staycation economy and provides momentum for the recovery of hotel market performance.”

High-end Residential
Residential 2Q22
Luxury Apartments
New Supply 2,218 units
Capital Values Growth 0.2% q-o-q
Rental Growth 0.1% q-o-q
High-end Villas
New Supply 0 units
Capital Values Growth -3.1% q-o-q
Rental Growth 0.1% q-o-q

Luxury apartment sales hit a record high. A total of 2,477 luxury apartment units were sold in 2Q22, up 192.1% q-o-q. The relatively loose monetary policy boosted market confidence. Newly launched projects released units to meet demand, leading the sales volume increase. Luxury apartment supply remained at a high level as developers sprinted for half-year results and started launching new units. A total of 2,218 new units entered the market in the quarter.

High supply and demand in Luxury market stabilised prices. Sales prices remained relatively stable in 2Q22, up 0.2% q-o-q. With the resumption of the leasing market in June, leasing demand gradually released and rents remained stable. "High-quality plots released in the second centralised land auction effectively ensured future supply. Rising demand is forecast to accelerate the pace at which high-end projects enter the market. It is expected that the new high-end supply will remain stable in the following year,” said Mi Yang, Head of Research for JLL North China. “The accelerated frequency of policy regulation will effectively stimulate fence-sitters to enter the market. In the short-term, the market transaction volume will remain strong, which will push high-end residential prices to enter a stable yet upward channel.”

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $19.4 billion, operations in over 80 countries and a global workforce of more than 100,000 as of March 31, 2022. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit