A recent press conference on the 2014 review of the north china property market and the 2015 vision, organized by hci, provided a retrospective analysis of the beijing building market and forecast future trends. Xi jianwoo, director of china district, department of international studies of gao, said: “the beijing writing building market has maintained a vacancy rate of less than 5 per cent, with the lowest vacancy rate in the country. With regard to rents, although the rents in the beijing market have been adjusted for seven consecutive quarters since the first quarter of 2013, they are still the highest in the country.”
The economic growth rate in beijing in 2014, despite a slight slowdown, remained generally stable. (b) according to the beijing municipal bureau of statistics, in the first three quarters the city's gross product grew by 7. 3 per cent over the same period, a decrease of 0. 4 percentage points compared to the same period in 2013; gross tertiary production grew by 7. 4 per cent, a decrease of 0. 1 percentage points compared to the same period in 2013. Against this economic background, the market for the first class building in beijing grew smoothly in 2014. The vacancy rate remained low, at 5 per cent by the end of the year, and remained the highest in the country despite a slight adjustment in rent. Lease demand from private domestic enterprises is strong, surpassing transnational and national enterprises and occupying a major part of the market。
Figure 1 annual new supply, net absorption and vacancy rates for the beijing a building
In 2014, only one project was completed, the second phase of the ocean international centre, located in the sub-market of the cbd, to add 50,000 square metres of additional supply to the market for grade a writing buildings。
Compared to the weak 2013 rent demand rebounded in 2014, with net market absorption increasing by almost 90 per cent to about 159,500 square metres per year. The main demand drivers during the year were domestic firms, especially from finance, it and services. It is worth mentioning that firms with a domestic portfolio are more flexible in their leasing criteria and have a streamlined approval process than multinational enterprises with tight regulatory controls and tight rental budgets. Representative leases include 19,000 square metres of new lease at the world ocean centre ii, located in the sub-market of the cbd; mass china rents 7,000 square metres at the port of qinti, located in the kyoko market; the mass media continued to rent 4,000 square metres in the cbd submarket building. Multinational enterprises have been limited in their expansion due to economic concerns, but are still actively renewing their leases. Representative renewals include re-leases of 2,500 square metres in east square at east changan street market and of 4,500 square metres in the sun lion group's century wealth centre at the cbd submarket。
By the end of 2014, rents in beijing for the a-rmb 309. 4 per square metre per month decreased by 0. 5 per cent, mainly due to preferential measures and rent discounts provided by owners to retain quality tenants. The cbd region recorded the largest rent decline, 2. 1 per cent over the same year, to some extent lower than the market average. On the contrary, the financial street market, with its limited rent space available and growing demand for leasing from financial enterprises, grew by 2. 1 per cent over the same period. The beijing market rent has been the highest in the country since the peak of rmb 327. 9 per metre per month in the first quarter of 2013。
Despite a large number of queries and transaction searches from domestic and international institutional investors, the investment market in the beijing building was less active than in 2013, with two whole-sales transactions recorded during the year. In march, heng fong realty development co. Ltd., beijing, purchased a crown building near the three rings in the north-east from crown city chase, inc., for approximately rmb 1. 1 billion. Upon completion of the project, the building will include approximately 21,200 square metres of rented write-off space. In april, capital transfers were purchased at a total value of $928 million (equivalent to $5. 7 billion yuan) in the centre of profits for complex projects in the triton region, making it the largest total sale in beijing for almost three years. The project covers 169,000 square metres of construction and covers writing buildings, shops and service apartments。
The 2014 central economic work conference reaffirmed the shift in emphasis from growth to quality and efficiency of economic development. The international monetary fund, the world bank and the china institute of social sciences forecast that china's economic growth will continue to decelerate to 6. 5 to 7. 2 per cent in 2015. As the pattern of economic growth evolves to be service- and domestic demand-driven, sectors that are highly dependent on exports and foreign investment may be negatively affected. However, the market prospects for the beijing writing building are promising, and rental demand continues to be underpinned by beijing's status as the national capital and its strong influence in north china. As the fastest growing industry in the tertiary sector in 2014, the financial sector's contribution to the growth of rental demand will be particularly evident。
Figure 2 average net rent and year-on-year change for the beijing a building
Looking ahead, the six a-class building projects, distributed across four sub-markets, will be made available in 2015, bringing the market to a total of approximately 395,000 square metres of construction space. The new projects include the cheinshiang, located in the financial street market, the poly international plaza t1 in the canton region, and the integration information centre b, located in the market in the central bank village. The entry of these new projects will ease the strain on the supply of rental space in their areas, but will drive up the vacancy rate in the short term due to the time required to be absorbed by the market. In view of the high quality of the new projects, the increase in rent for the beijing writing building is expected to pick up in 2015。
The investment market in the beijing building will continue to be favoured, benefiting from the strong fundamentals of the beijing market, high rent levels and the potential for growth in the value of capital. However, limited investment opportunities may lead to more risk-tolerant investors looking for opportunities in the emerging writing building market, such as the reza financial business district in the tondai district and the new town of tunzhou in the tunzhou district. Assets either performed or remained relatively stable, with a steady rise in capital values and a small contraction in returns。
