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September 29, 2017

Beijing’s central business district is on the fast track to becoming a world-class office market with 18 buildings set to be added to the CBD Core Area from next year to 2025 and beyond.

“Once everything is built, the CBD Core Area promises to double the present amount of Grade A office space in the CBD with a total of 1.8 million sqm of supply,” says Eric Hirsch, Head of Markets for JLL North China. “The new stock will relieve the shortage of centrally located office options for companies in Beijing.”

According to the latest report from JLL, the mega-office cluster is set to feature China Zun which, at 525 metres, is slated to be the tallest building in Beijing.

Time to shine
The new developments will significantly increase the CBD’s office stock, driving it to account for 40 percent of Beijing’s total Grade A office supply by 2025. According to Hirsch, “this is the opposite of most global cities in the world, where ample space for new office development tends to be further away.”

There are also plans to equip the area with underground car tunnels, pedestrian links, and a future new CBD metro line for better connectivity and positioning of Beijing’s CBD as the nexus for key businesses, professionals, and decision-makers.

Hirsch points out that these developments will complete the next phase of Beijing’s journey to achieving a CBD of global distinction.

Impact on landlords and rentals
The surge in supply is expected to have limited downward pressure on rents in the immediate future. But as the majority of the new buildings come online over the next five years, landlords are likely to show more flexibility and make greater allowances for well-established and reputable firms.

“There will be greater parity between landlords and tenants, says Hirsch. “The leap forward in large, quality space combined with lower rents will trigger upgrade demand from tenants. For tenants who used to be spread out across the city, it is an opportunity for consolidation to be in one central location.”

The report further projects economic growth to support the city’s ability to absorb the incoming supply and demand for office space should be strong as Beijing leads China in the service sector of the economy.

Tertiary sector GDP is expected to grow at 41 percent over the next five years compared to 27 percent growth in Grade A leasable stock over the same period.

“Once the pre-leasing period is over and these new CBD Core Area buildings are occupied, achievable rents should rise,” says Hirsch. “As these new buildings fill up, landlords will enjoy greater pricing power.”

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Eric Hirsch

Head of Markets for JLL North China

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