Beijing: 5 January 2023 – “Beijing’s commercial real estate market experienced a series of twists and turns in 2022. Although the market did not see an upswing at the end of the year, the recovery of the economy and market activity is expected to accelerate with recent major adjustments to the Covid-19 control policies,” said Julien Zhang, China Chief Strategy Officer and Managing Director for North China, JLL. “It takes time for the market to set a solid foundation for recovery. The year 2023 is expected to demonstrate an increasingly clear sign of stabilisation.” 

The Grade A office market saw an expansion of its rent decline. Covid outbreaks have led to further contraction of leasing demand in 4Q22, and the annual net absorption figure dropped by 81% year-on-year. In the investment market, the total transaction volume decreased by 57% compared to 2021. The types of properties transacted became more diversified while business parks and logistics received increasing interest from investors. Demand in the retail market was further affected by the Covid-19 situation. Several retail projects postponed their opening date due to delays in construction schedules and pre-leasing progress. The industrial market recorded a slight increase in rents amid the downtrodden economy and three new projects entered the market. The hotel market remained sluggish in the second half of 2022, August being an exception, while the supply of upscale hotels increased slightly in the second half of 2022. Although the sales activity in the high-end residential market was hindered in 4Q22, the annual sales volume hit a five-year high.
 

The demand structure remains stable, with a slight increase in health care demand. Despite downward pressure from the economy, overall market demand remained solid in the fourth quarter. Demand growth was moderate in the BALP and TLP sub-markets, which outperformed other sub-markets. Several large-area new leases were completed in these two sub-markets. In terms of sources of demand, e-commerce, supply chain and manufacturing industries continued to account for about 70% of market demand. The Double Eleven shopping festival and other large-scale e-commerce events in the fourth quarter also drove demand for short-term leases in related industries. Additionally, Sino Pharm, the dominant healthcare company, signed a new lease for 12,300 sqm in the fourth quarter, leading to a significant increase in healthcare sector demand. For supply, three new projects, with a total GFA of about 240,000 sqm, entered the market in 4Q22. The three new projects were quickly absorbed, with 90% of the total area pre-leased before they officially entered the market, thus adding limited supply pressure on surrounding projects. The vacancy rate increased slightly for only 0.4 ppt to 5.8% in 4Q22.

Market rent increases 4.3% y-o-y in 2022. Overall rent growth maintained a modest growth trend in the quarter, rising 1.1% q-o-q in 4Q22. Solid demand has offset new supply pressure, keeping rents rising steadily throughout 2022. High-quality projects in major sub-markets led rental growth. At the same time, low-priced areas, such as Pinggu district, also saw the rents gains in 2022. “In 2023, New supply will reach a historical peak,” said Mi Yang, Head of Research for JLL North China. “In 2023, 550,000 sqm of new supply is expected to enter the market. Of the new supply, 60% will be in the Daxing International Airport sub-market.” The large-scale supply will bring a major change to the structure of Beijing’s logistics market, a new submarket — Daxing International Airport will be established in 2023. The vacancy rate will be pushed up to around 9.7% in 2023 due to the large supply, an increase of 3.9 ppts from 2022.