Beijing commercial real estate market outlook

Amid a challenging macroeconomic environment, the latest data with respect to demand and rents shows that the downward trend of Beijing’s commercial real estate sector accelerated in 2024, and a market recovery could be delayed.

Amid economic challenges and reduced occupier demand in 2024, office landlords adopted flexible pricing strategies, resulting in the steepest rental plunge on record. Overall Grade A rent declined by 16.1% for the full year, which accelerated from the -8.0% y-o-y drop in 2023. This trend of declining rents across the market sparked a temporary uptick in leasing activity, stimulating tenants into seeking more cost-effective relocation opportunities. As a result, total Grade A office leasing transaction volume rose by 22% y-o-y. Of which, large-sized transaction volume (more than 10,000 sqm) was up 30% from 2023.

Figure 1: Beijing Grade A office leasing transaction volume (2021-2024)

The slow retail market recovery witnessed in the first half of 2024 remained fragile in the second half. At the same time, new supply of prime retail space reached a record 1.62 million sqm in 2024, intensifying competition in the retail market. In such circumstances, most landlords changed their strategy, as new projects were released into the market first and then gradually filled the vacant spaces. In 2024, the average pre-commitment rate for new additions was only 72%, yet in previous years, new project openings would definitely be postponed when the pre-leasing rate was below 90%. Looking forward, there is a sense of optimism as most new projects to be launched this year should be able to gradually increase their occupancy rates to around 90% within one year of opening, driven by F&B brands.