A number of market institutions have released the vacancy rate of Grade A office buildings in Beijing in the first quarter of 2021, showing that the vacancy rate rose to 16.6%, up 0.8 percentage points from the previous quarter, setting a new record high. Some agencies believe the vacancy rate will rise to 20% this year.
Beijing’s office vacancy rate has risen sharply since the end of 2019, Caixin reported on April 14. in the fourth quarter of 2019, the city’s Class A office vacancy rate stood at 12.7 percent, a sharp increase of 3.5 percentage points from a year earlier.
While office vacancy rates are rising, office rents are also continuing to fall. According to DTZ, monthly office rents in Beijing citywide were RMB334.3 (RMB, same below) per square meter in the first quarter of 2021, down 0.8% YoY, but down 2.4 percentage points YoY from the fourth quarter of 2020.
Savills expects that the large amount of new supply will further push up Beijing’s office vacancy rate to 18% to 20% due to the new supply of 1.379 million square meters of office space throughout 2021. As a result, landlords may have to continue to “reduce prices in exchange for de-commissioning” and rents will continue to fall by 3% to 3.5%.
The vacancy rate of 10% is the turning point between the buyer’s market and the seller’s market in the office leasing market, according to Wen Shuyuan, head of Savills’ transaction and consulting business in North China, “A vacancy rate of more than 10% means the owner’s bargaining power is weakened and it enters the buyer’s market, while a vacancy rate of 20% means the owner is under greater pressure to rent.
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