Beijing's office market saw a steady recovery in the third quarter, with the demand from large domestic firms remaining strong and that from the multinational companies picking up as the global economy revives.
The recovery in the office market, which is reflected in the falling vacancy rate and stabilizing rent, is powerful evidence for the resurgent economy, experts said.
According to Jones Lang LaSalle (JLL), an international real estate service provider, the total net absorption of office buildings in the capital amounted to 139,100 sq m in the third quarter, which is the largest absorption recorded since the economic downturn and almost double the amount seen in each of the previous three quarters.
"Absorption was once again largely driven by the continued demand from State-owned enterprises, especially from domestic financial companies, which were aggressively expanding their presence in the capital city," said Julien Zhang, managing director of JLL Beijing.
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Within the total net absorption, 60 percent was taken by domestic financial companies, much higher than the 30 percent level seen at the beginning of the crisis in the third quarter of 2008.
The demand from multinational companies is gradually rebounding, although it was still much less than the demand from domestic firms because of the financial crisis.
Statistics from transnational real estate agency CBRE showed that NTT, Japan's largest telecom company, recently rented 10,000 sq m of floor space at Phoenix Plaza, a Grade A office building located in northern Beijing's Sanyuanqiao area.
Central Point, a Grade A office building located along the eastern section of Second Ring Road, has rented out more than 6,000 sq m to a number of international clients within the last two months.
Guo Fengrui, deputy manager of China Resources Land Ltd (Beijing), the developer of Phoenix Plaza, said that around 75 percent of Tower A of the office building complex had been rented in the past four months, exceeding their expectation.
"The rent, which currently ranges from 160 yuan to 190 yuan per sq m, also saw an obvious increase compared with months ago," Guo said.
A representative of NTT said that, besides the quick and convenient transportation between Phoenix Plaza and Beijing International Airport, it is a good time to rent offices now, as the price remains attractive.
JLL's latest report showed that in Beijing's overall office market, rents decreased by 2.9 percent quarter-over-quarter from July to September, much slower than previous quarters, to 208 yuan per sq m per month.
Newly completed Grade A buildings contributed most to the decrease, with a 3.9 percent drop quarter-over-quarter in the Grade A market to 228 yuan per sq m per month.
Among the Beijing submarkets, net absorption in the Finance Street area surpassed that in the Central Business District (CBD) for the first time this quarter, totaling 60,800 sq m, mostly from domestic financial companies.
The most noteworthy transactions in this area are Beijing Rural Commercial Bank's leasing of the whole 29,000 sq m block of the north tower of Finance Street Center and Pudong Development Bank securing 30,000 sq m in the Fortune Resources International Building.
As these tenants are less sensitive to rentals and generally backed by the government, their transaction rentals were much higher than in other buildings on the eastern side of the city.
The vacancy rate in the CBD area decreased for the first time since the third quarter of 2008, as there was no new supply so far. And demand in the CBD continued to be stable, with net absorption totaling 41,300 sq m.
"Although less than that on Finance Street, we still consider this area as the most preferred destination for companies to settle in due to the more diversified tenant mix in this area and the higher availability of high-quality office space leading to much lower rentals," said JLL's Zhang.
The rebounding of demand proved to be much quicker than originally expected. However, as the demand from multinational companies is still slowly returning, and the overall economy remains uncertain, whether the net absorption in the fourth quarter can surpass that in the third quarter is still in doubt.
"Rents in the fourth quarter are expected to stabilize, as the rebounding confidence of the market will prevent them from dropping significantly," said Donny Ma, director of CBRE China.
Looking forward, there will be three Grade A offices completed in the fourth quarter in Beijing, bringing 195,000 sq m into the market, according to CBRE.
"The rents may even pick up in the fourth quarter, depending on the extent of the global economy's recovery," said Wen Shuyue, senior manager of the office sector for Savills Beijing.