Knight Frank released its latest findings on Q4 2013 Beijing property market.
In the fourth quarter, Beijing’s economy remained stable. Domestic firms continued to play a major role in the office leasing market. Meanwhile, office demand from the energy, e-commerce and IT industries remained strong.
Three office projects, namely Runshi Center in Lufthansa, Fortune Plaza III in CBD and Ocean International Center II outside of East 4th Ring Road, were launched in the fourth quarter, providing a total of 265,000 sqm of Grade-A office space. Around 50-60% of space in the three projects was leased, with rents ranging from RMB300 to RMB400 per sqm per month, relatively low compared to the market levels, but they are expected to rise along with the growth of occupancy rate.
The launch of the three office projects in the quarter pushed up the market vacancy rate to 5.0%, up 1.1 percentage points compared to last quarter. The average rent edged down 0.6% to RMB381.5 per sqm per month. The rents of Grade-A offices dropped 3.6% year on year, while the average selling price surged 18.4%. Some purchasing power was shifted to the office market due to purchasing limit policies in the residential market. Furthermore, the high-rising housing market helped to lift people’s expectations on office investment.
Zhang Jingjing, Associate Director and Head of Research & Consultancy at Knight Frank, Beijing, says new Grade-A office supply in 2014 is anticipated to be around 300,000 sqm, which is quite low. Therefore, market vacancy rate is expected to remain at a low level of around 5% and rents will remain flat in 2014.
In the fourth quarter, Aegean Shopping Center in Taiyanggong opened, providing 130,000 sqm of space. Covering trades of supermarket, food, clothes, cinema and others, it achieved an occupancy rate of 85%. V-Mall, located in Changping, was also opened at the end of year, providing 96,000 sqm of retail space.
A few traditional holidays in the fourth quarter drove up retail sales in Beijing. The average rent of prime retail rose 4.6% to RMB1,281 per sqm per month. The market vacancy rate went up nearly 1 percentage point due to new supplies, remaining at a relatively low level of 8.8%.
The total new supply of prime retail space reached 500,000 sqm in 2013. Zhang Jingjing, Associate Director and Head of Research & Consultancy at Knight Frank, Beijing, expects another 500,000 sqm of prime retail space to enter the market in 2014. Market supply is sufficient in the retail sector.
In order to curb housing price surge, Beijing released the “self-use commodity homes” policy at the end of October. Buyers decelerated buying and started to watch, leading to a significant drop in transaction volume. Home prices continued its upward trend, though the growth rate slowed down. The average transaction price of luxury residential rose by 17.1% year on year in 2013.
Housing transaction volume slumped over 30% in the fourth quarter. Meanwhile, the government tightened the control of sales permission on luxury homes, resulting in a dramatic decline in market supply.
In the rental market, due to the seasonal impact, the average rent declined 1.9% quarter on quarter, while the market vacancy rate went up 1.2 percentage points to 11.3%.
Zhang Jingjing, Associate Director and Head of Research & Consultancy at Knight Frank, Beijing comments that the government has been increasing land supply for “self-use commodity homes” since the end of 2013, which is expected to drag down the growth pace of housing price to around 10-15% in 2014.