Beijing's commercial real estate market is undergoing a profound structural transformation.
The current state of the Beijing office market does not represent a simple cyclical adjustment but rather marks the beginning of a phase of systemic market restructuring, according to Zhang Jisu, Managing Director of North China at Jones Lang LaSalle (JLL). Facing a new normal of market repricing, both property owners and tenants must jointly reshape their strategic logic, shifting from mere price competition towards long-term value creation and cost-efficiency optimization.
In the second quarter of 2024, the Beijing office leasing market continued the moderate trend observed since the start of the year. The Zhongguancun area, bolstered by its strong industrial characteristics, demonstrated regional market resilience. It continued to attract quantitative funds and emerging technology firms in sectors like artificial intelligence and humanoid robotics, making it a highlight of the quarter. This year is a peak supply year for Beijing's office market, with approximately 700,000 square meters of new space expected to enter the market.
Zhang Siliang, Senior Director of Commercial Real Estate for North China at JLL, noted that the average rental decline for Grade A offices across the city has narrowed since the beginning of the year. For tenants with large-area leasing requirements, most landlords still maintain a degree of rental flexibility.
The investment market in Beijing continues to show a divergence in trends. Core locations and high-quality assets remain of interest to domestic buyers. Owner-occupier buyers have stayed relatively active. For instance, AI company Zhipu announced the acquisition of Diamond Tower in the Zhongguancun Software Park in the Shangdi area for a total consideration of approximately 360 million yuan, planning to use it as the company's headquarters.
Simultaneously, retail real estate continues to attract investor favor. Benefiting from the steady progress of China's public REITs market, retail asset portfolios with prime locations and stable cash flows have become a hot spot for capital allocation. Outlet-type assets also maintain strong appeal. The strong performance of outlet-related products among recently listed commercial real estate REITs has further boosted market confidence. Xu Qianqian, Head of Capital Markets Operations for China and North China at JLL, stated, "High-quality retail asset portfolios with stable cash flows and mature operations continue to garner attention from investment institutions. In the current market environment, investors place greater emphasis on income certainty and asset liquidity. Premium retail assets and scarce, high-quality Grade A office buildings will remain important allocation directions for most institutional capital."
Within the retail property sector, demand from the food and beverage segment remains the primary engine driving market activity, accounting for 38% of newly opened store area in the first half of the year. 3C digital brands have performed notably well, gradually replacing traditional anchor tenants to occupy central positions on the ground floors of shopping malls. Ji Ming, Senior Director of Research for North China at JLL, commented, "Although macro demand is still recovering, the active expansion of new business formats is injecting fresh vitality into the market. Sub-sectors that focus on technology and culture, and offer high 'emotional value for money,' are becoming new drivers of market demand, precisely catering to the iterative upgrade of consumer preferences."
In the industrial logistics real estate sector, cost-driven relocation remains the main theme. The trend of demand spilling over from high-rent mature sub-markets to peripheral, lower-cost emerging sub-markets continues. In the second quarter, the Pinggu sub-market, leveraging its rental and hardware advantages, continued to absorb this spillover demand, leading the city in absorption rates. Concurrently, some tenants originally using non-high-specification warehouses are seizing the current 'tenant's market' window to upgrade and relocate to high-spec warehouses at a controllable cost. This type of upgrade demand typically involves individual lease areas of 3,000 square meters or less but has a significant long-tail effect, representing a valuable source of incremental demand for the market. Landlords generally continue their 'volume-for-price' strategy, attracting tenants with price advantages and flexible lease terms.
Looking ahead, Beijing's non-bonded high-spec warehouse market is expected to continue its gradual recovery. Growth in smart wearable devices and high-efficiency home appliance categories will boost e-commerce business, driving expansion in storage and leasing demand from leading third-party logistics firms. On the other hand, consolidation in the third-party logistics industry is accelerating, increasing market concentration. Leading companies, aiming to optimize supply chain efficiency, tend to lease high-spec warehouses to deploy intelligent warehousing systems, structurally pushing up leasing demand. Ji Ming added, "From a medium to long-term perspective, as supply-demand dynamics improve, particularly with incremental demand released from high-end manufacturing, the market fundamentals are expected to see a substantial bottoming out and stabilization after 2028."
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