Beijing Office Market Under The Epidemic Situation: Vacancy Rate Reaches A New High In Recent Ten Years

The impact of new crown pneumonia on the real economy is gradually reflected in the office market.

CBRE recently released a report showing that in the second quarter of this year, the supply of high-quality office buildings in Beijing exceeded demand again, and the demand gap reached 38700 square meters, which was the second consecutive quarter of the city's net absorption. In the second quarter, the overall vacancy rate of Beijing's high-quality office market rose to 15.5%, the highest since the third quarter of 2010.

The reason for the increase of vacancy rate is not only the increase of supply, but also the slow recovery of demand. Affected by the epidemic situation, the cost control of enterprises is more strict, and the expansion speed is reduced. Among them, foreign tenants are more cautious.

In the second quarter, the rent of Beijing continued to decline. In addition to providing tenants with more flexible rent and rent free rate, there is also a greater degree of rent reduction for the tenants. But at present, it may take time for the market to recover.

The decline in rent was the biggest in nearly a decade

Affected by economic slowdown and other factors, Beijing office market demand has been sluggish since last year. According to CBRE CBRE CBRE CBRE, the net absorption of Beijing's high-quality office market in 2019 was only 121000 square meters, the lowest in the past five years. Among them, the market performance of Grade A office buildings is relatively stable, and the net absorption of grade B office buildings with slightly poor quality is - 96000 square meters, a record low.

Under the dual pressure of the peak supply and the lack of new rental power, the rent of office buildings in Beijing fell by 1.4% last year, the biggest drop since 2010, of which the decline in Grade B market was 2.1%.

In 2020, affected by the new pneumonia epidemic, the new supply will be postponed to enter the market. But demand is also affected. According to a number of institutions, in the first quarter of this year, the demand for new rental in Beijing's office building market was postponed or temporarily stagnated, and the phenomenon of area reduction and rent cancellation of tenants in exhibition, entertainment, trade and other industries was more obvious.

According to CBRE, the vacancy rate of Beijing's office market was 14.5% in the first quarter of this year.

By the second quarter of this year, the previous backlog of rental demand began to seek release, and the rental demand of the office market rebounded. However, as the supply scale of the new deal is still large, the vacancy rate has further increased and the rent has also declined. The average rental of office buildings in Beijing fell by 1.5% on the quarter to February.

Zhang siliang, director of commercial real estate department of Jones Lang LaSalle in Beijing, said that under the special background of the impact of the epidemic, office owners pay more attention to the rental rate than to pursue rent growth. Therefore, office buildings tend to attract tenants by reducing prices.

In terms of industry, in the current office market, the science and technology industry is more active, especially the online education and game enterprises are showing a positive trend of rent expansion; the demand for upgrading, relocation and rent expansion of pharmaceutical enterprises is also more significant.

From the perspective of capital type, domestic enterprises are still the main force in the market. According to the statistics of the newly increased number of joint venture enterprises in Beijing, 71% of the newly increased office buildings in the first quarter of the year accounted for 71%. "Foreign tenants are more cautious due to stricter budget and cost control."

The shop market is also affected by the epidemic. Statistics from several institutions show that the vacancy rate of retail shops in Beijing has increased since this year, and the rent has fallen. Among them, catering and entertainment are greatly affected.

In addition, industrial logistics real estate and high-end hotels were also hit hard. In recent years, the vacancy rate of LIANHANG real estate reached a new high of 4.9% in the last quarter. As of May this year, the demand for high-end hotels in Beijing has decreased by 71.7% year-on-year, and the revenue per room available for rent has decreased by 74.6%, about 5% to 10% higher than that in other first tier cities.

It will take time to recover

Due to the repeated outbreaks in the second quarter, the transaction of Beijing's office and shop markets has been at a low ebb. However, analysts pointed out that although the epidemic has been basically controlled, the long-term impact can not be ignored.

The person in charge of an office building in CBD area disclosed to the 21st century economic report that the recent rent situation is not ideal, and the intended customers are obviously less than in previous years. He said that in 2019, the project has been difficult to rent, the specific reasons may be the economic restructuring, the decline in growth rate, and the reduction of foreign enterprises' investment in China.

"Tenants (tenants) can obviously reduce the number of foreign investors in the first place." He said.

The prosperity of the office and shop market is closely related to the economic situation. As the impact of the epidemic on the economy is not short-term, the recovery of the office and shop markets may also need a process.

Zhu Yumin, director of Laifang and director of Beijing office building service department, said that the epidemic situation in foreign countries was still spreading, and the uncertainty of the future economic situation was increasing, and the overall market demand continued to be suppressed. Therefore, it is expected that the market of Grade A office buildings in Beijing will still face a more severe situation in the second half of the year. The rent will be under pressure and the vacancy rate will continue to rise.

Zhang Jisu, consultant of CBRE global Huabei district, also believes that the repeated uncertainty of the epidemic situation and the pressure of operating costs this year restrict the release of market demand for office buildings. At present, both tenants and owners focus on the renewal negotiation. It is expected that the phenomenon of rent reduction will continue, and the future office market rent level will decline, thus stimulating the rise of lease transactions.

Due to the relatively small scale of the tenants, many of them are relatively small in capital. Even after the end of the epidemic, the recovery of demand is relatively slow.

CBRE points out that it is expected that the phenomenon of closing stores in entertainment and children's formats will be further revealed in the future, and the pressure on the owners to hire will continue to increase in the future. Reducing the rent or providing more flexible lease terms will be the main choice for the owners. But overall, the vacancy rate pressure will still exist in the short term.

In addition, the recovery of industrial logistics real estate and high-end hotels is also considered to be a slow process.