Beijing's office rent set to stabilize in H2

Average net effective rent of Beijing's Grade A office is expected to stabilize in the second half after five consecutive quarters' decline, a report from Colliers International showed on Wednesday.

"The positive economic growth in June and steady levels of pre-commitment for the upcoming supply are expected to restrain the growth of the vacancy rate, and lead the average net effective rent to stabilize after several quarters of decline," the global real estate consultancy company said in a research report.

The rent of Beijing's Grade A office continued to decrease in the second quarter this year, edging down by 0.1 percent quarter-on-quarter or 3.8 percent year-on-year, to 310.3 yuan ($50) per square meter per month, as landlords responded to tightened corporate leasing budgets. This was the fifth consecutive quarter to witness a rental correction, according to the company.

However, the decline in rents slowed, and some submarkets experienced modest growth. In both the CBD area and the Lufthansa area, rent declined by 1.1 percent q-o-q, respectively. In the CBD, this was primarily an effect of below-market average rent at a new project launched in the fourth quarter of 2013. By contrast, the Financial Street, Zhongguancun and Wangjing submarkets all saw modest rental growth, to 384.5 yuan psm per month (up 1.7 percent q-o-q), 242.2 yuan psm per month (up 2.9 percent q-o-q) and 228.9 yuan psm per month (up 2.4 percent q-o-q), respectively.

Going forward, five office projects are scheduled for completion during the second half of 2014, bringing a total of about 250,000 square meters of office space to the market. As a result, the competition between (and within) existing buildings and new developments, and even between (and within) traditional submarkets and emerging areas, is expected to increase, resulting in an active leasing market, according to the report.