News release

Office and retail rents record largest annual decline in years as impact of Covid-19 hangs on market

According to JLL Beijing’s 2020 Property Market Review and 2021 Outlook

January 14, 2021

Beijing, 14 January 2021 - “The year 2020 may not have ended on an upswing, but there is a general sense in the market that 2021 will not see as gruelling of a time; even as new Covid-19 cases surface in Beijing and other parts of the country; the situation in China is widely considered to be under control,” said Julien Zhang, Managing Director for JLL North China. “At the same time, after having survived the challenges brought on by the virus in 2020, major stakeholders and participants remain sober about the looming challenges for 2021.” 

In the office market, new sources of demand remained limited in the quarter, but the pace of relocations and upgrades accelerated in the final months of the year; tenants with the financial ability to move looked to take advantage of the low-rent environment. Investors remained active, with the total sales volume for the year reaching RMB 47 billion by end-2020. The slow market did not stop investors from searching for opportunities – office assets remained highly popular considerations. Retail leasing demand continued to pick up. Sporting brands actively expanded their children’s business, while electronics retailers increased their mall presence. The industrial market held stable, finishing off a difficult year with slight rental growth. Upscale hotel performance continued to rebound from July, although recent cases of Covid-19 may bring new challenges. High-end residential sales spiked in the last stretch of the year. Buyers were strongly encouraged as developers pushed year-end sales with plenty of promotions and discounts.

Grade A Office
Office 4Q20
Vacancy 15.4%
New Supply 240,702 sqm
Rental Growth -2.6% q-o-q

Although rising pressure continued to hold back demand, relocation demand accelerated in the quarter, triggered by the sequential rent drops. Recent market conditions encouraged tenants to leverage the tenant-favourable environment, with relocations making up almost 60% of leasing transactions in the quarter. Despite the prolonged slow market, domestic companies continued to be a steady source of demand, with 65% of transactions in the quarter driven by domestic firms. Meanwhile, as Covid-19 drove demand from the healthcare industry, leasing activity from this sector amounted to around 15% of new demand by end-2020.

Two new buildings came on stream in the quarter, but both entered the market with low occupancy rates. This contributed to the rise in the overall Grade A vacancy rate, with the figure inching up to 15.4% at end-2020. While landlords in the CBD Core Area and Lize delayed completion dates and, to an extent, helped mitigate supply pressures, the slower-transaction environment continued to weigh on the market; a number of tenants downsized or pursued more aggressive strategies to reduce real estate costs. 

Rents record eight-consecutive quarters of decline at end-2020. During the quarter, overall rents continued to drop as market pressures mounted, recording -2.6% q-o-q growth and -7.9% y-o-y growth by end-2020. Landlords under increased vacancy pressure remained worried and were prompted to provide discounts and incentives to draw tenants and help stabilise their buildings. “Even after such a tough year as 2020, market pressures are unlikely to go away anytime soon in 2021,” said Michael Zhang, Director of Office Leasing for JLL Beijing. “Demand is expected to remain soft, and a large amount of new supply is set to come online. As mounting pressures continue to hang on the market, rents will drop further – although we should start to see the pace of declines slow. Still, with the market requiring more time to recover, both landlords and tenants should be prepared for more trying times ahead.”


All things considered, Beijing retained its position as a major go-to market for both domestic and foreign investors, achieving a respectable sales volume of around RMB 47 billion in 2020. The figure was still higher than the 2018 level, but down significantly from 2019 when Beijing marked a decades-high peak at RMB 80 billion. Still, despite the tough year with Covid-19 distracting and hampering a number of prospective deals, the market saw several highlights during the year. At a time when many investors were retreating from other markets, the high-profile sale of LG Twin Towers – a rare core office asset – early in the year, followed by multiple data centre transactions around the city, underscored the attractiveness of Beijing commercial real estate across sectors. 

Moreover, despite Covid-19, the year 2020 marked a milestone for foreign investors, as they claimed just over a third of Beijing’s deals – the highest proportion recorded in recent years. As the impact of the virus on the market appeared to be less severe than that on other competing markets, Beijing was perceived as a strong place for foreign investors to put their money, especially as conditions in their home markets worsened. In 2020, foreign investors accounted for 35% of Beijing transactions, up from 30% in 2019 – a record year for the city in terms of total sales volume – and significantly greater than their market presence in 2018 when foreign buyers made up just 22% of the market’s transactions. “Beijing is expected to remain a strong choice for foreign investors, particularly as the nation’s capital is predicted to see more signs of recovery sooner than most other major markets overseas,” said Michael Wang, Senior Director of Capital Markets for JLL North China. “Moreover, given the city’s strong fundamentals and the fact that investment conditions are still likely to be favourable for investors going forward – with more tradable assets likely to surface and further room for negotiation – we are likely to see enthusiasm in the market continue to rise in 2021, not just from foreign players but also domestic investors.” 

Prime Retail
Office 4Q20
Vacancy 7.9%
New Supply 400,983 sqm
Rental Growth -4.2% q-o-q

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

Leasing activity continued to pick up in the quarter, with electronics and kids’ sports brands among the most active with expansion. Electronics retailers expanded their offline presence, leveraging new product launches to increase brand exposure at new store locations. Among them, domestic camera drone retailer, DJI, opened three new stores, including a two-floor flagship store at China World Mall. Following the trend of sports fashion, sports brands actively expanded their children’s lines. Domestic sportswear giant Anta Group promoted portfolio brands, including Anta Kids and Fila Kids (China). Foreign sports retailers, such as Nike and Adidas, were also notably active in the quarter. 

China’s debut Joy Breeze mall was among four new projects to enter the market during the quarter – at a time when retail rents registered record-high declines. Despite the challenging market, new projects opened in the quarter, including the country’s first Joy Breeze mall by GRANDJOY (owned by COFCO Corporation). Meanwhile, rent drops accelerated in both the Urban and Suburban markets in the quarter. In many cases, landlords under high-vacancy pressure continued to lower rents. In other cases, as more retailers started to look for opportunities, landlords provided greater rent reductions to close more deals towards year-end. Urban rents saw -4.2% q-o-q growth, while suburban rents registered -4.8% q-o-q growth. The declines saw both markets witness their steepest annual rent drops on record in 2020, with -9.5% y-o-y growth and -11.0% y-o-y growth, respectively. “In spite of the tough market conditions, the slowly improving retail environment is providing landlords and retailers with some possibilities for light at the end of the tunnel,” said Ji Ming, Research Director for JLL Beijing. “Lower-rent options are also creating new opportunities, and these are expected to grow further, especially as more malls are set to enter the market in 2021, including those that were put off track by Covid-19 in 2020.”

Industrial 4Q20
Vacancy 5.2%
New Supply 0 sqm
Rental Growth 0.8% q-o-q

The strong year-end shopping season that featured ever-popular sales events, such as Double 11, helped to serve as a boost to leasing demand in the quarter. Logistics firms, express delivery companies, and e-commerce retailers were active with expansion in the final months of the year, as a number of commercially celebrated holidays, in addition to Double 11 – including Double 12, Christmas, and New Year – supported an increase in retail spending. Although many of these tenants’ requirements for the quarter were temporary, some were considering the possibility of extending their requirements over a longer term. 

Overall market sentiment was more positive than negative at year-end, given that the majority of projects remained stable during the quarter and the overall vacancy rate held steady at a low level (5.2%). There were also landlords with rising vacancy pressures earlier in the year who were able to secure a sufficient number of tenants towards year-end, easing the market’s downward pressure and helping them to hold a more positive sentiment heading into 2021. After market rents were nearly flat for most of the year, some landlords were able to raise rents slightly during the quarter, supporting cautiously optimistic – albeit modest – views on rent growth for 2021. “Although challenging market conditions and significantly slower growth were unavoidable in 2020, sustained industrial activity from increased online retail demand and other rising sectors, such as healthcare, supported the stability of the market throughout the year,” said Mi Yang, Head of Research for JLL North China. “As such, this sector of the city’s commercial real estate market is expected to rebound relatively faster than others and this is a huge draw for investors, a number of whom are increasingly interested in scouring the market for opportunities.” 

Hotel* YTD Nov 2020
Occupancy 33.6%
ADR* 948.4 RMB
RevPAR 318.7 RMB

Note: Hotel refers to the upscale hotel market. *ADR is inclusive of service charge.

In the second half of 2020, hotel performance continued to rebound starting late July, but the recent COVID-19 cases may bring new challenges. Business and leisure travel demand began to recover after Covid-19 being under control in late July after the second outbreak in Beijing. The resumption of various exhibitions also increased the MICE demand. More than 60 exhibitions were held in Beijing in 2020, and the number of exhibitions in Q4 2020 reached 90% of that in the same period of 2019. The recovered demand improved hotel performance. As of November 2020, Beijing’s upscale hotel occupancy, the average daily rate (ADR) and revenue per available room (RevPAR) had returned to 44.6%, 84.4% and 38.0% separately of that in the same period in 2019. 

However, considering the new cases of COVID-19 in late December, Beijing has reinstated the restriction on all social events. It has, proposed the requirement to “suspend all large-scale gatherings and cancel all meetings with more than 100 people". The MICE industry demand is expected to be greatly affected due to these measures. Also, corporate and leisure events are expected to decline in the short term. The occupancy rate of upscale hotels in major regions (Yansha, Financial Street, CBD, etc.) has recently declined by 20 to 30 percent.

Upscale hotels in different regions of Beijing showed varying degrees and characteristics of performance recovery. Upscale CBD hotels benefited from the proximity to major offices and recovered rapidly with domestic business travel and MICE demand. Besides, they attracted clients from other regions due to lower rates. Thus the demand in H2 2020 gradually recovered to the same level of 2019; Upscale hotels in Sanlitun showed an obvious upward trend in leisure demand, mainly due to the geographical advantages and online promotions. In the Financial Street area, the demand for upscale hotels recovered to nearly 70% of that in the same period in 2019, mainly due to domestic business travel recovery. However, the recovery of international business travel, which is one of the main sources of demand for Financial Street upscale hotels, will take time. For the Yansha region, the upscale hotels were affected due to the declined demand by embassies and the diversion of demand to the CBD area. The recovery of business travel demand was limited, and the overall performance was not as good as other major regions.

"Recently reported positive cases might lead to another downward trend in hotel occupancy in the short run. Considering this fresh risk, the upcoming traditional off-season during the Spring Festival, and the expected enhancement of security and pandemic prevention measures in the wake of NPC and CPPCC in March, we expect to see a demand recovery in April," said Tony Liang, Vice President of JLL Hotels and Hospitality in Greater China.

High-end Residential
Residential 4Q20
Luxury Apartments
New Supply 2,703 units
Capital Values Growth 0.1% q-o-q
Rental Growth -0.5% q-o-q
High-end Villas
New Supply 65 units
Capital Values Growth -1.3% q-o-q
Rental Growth 0.6% q-o-q

Continuing the trend from the previous quarter, both housing demand and sales volumes continued to rebound, supported by huge supply. Many developers also offered seasonal promotions and provided discounts, further driving sales at year-end. The increased sales activity in the quarter saw full-year 2020 sales volume for luxury apartments reach 1,934 units, down just slightly (0.9%) from the 2019 figure when Covid-19 had no major impact on the annual total. In the quarter, the sales spike came as 2,703 luxury apartments entered the market – up a remarkable 121.2% q-o-q, marking an eight-year quarterly high, while also pushing the full-year supply of luxury apartments up to an eight-year annual high. 

As demand and sales recovery continued towards year-end, luxury apartment primary prices remained stable after returning to positive growth in the previous quarter. While many developers continued to unleash discounts to push more sales through at year-end, others actually increased prices as demand for their projects was strong. “Although both demand and sales volumes are rebounding, luxury apartment price growth is expected to be restrained for much of 2021,” said Mi Yang. “As tighter policy aimed at better controlling debt in the housing sector – namely, the ‘Three Red Lines’ – took full effect at the start of the year, developers remain under pressure, and this is likely to further prompt sales as a priority over price growth.” 

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 $18.0 billion in 2019, operations in over 80 countries and a global workforce of over 92,000 as of September 30, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit