Humiliation of the Central Water Capital... Beijing Office Vacancy Rate Hits 13-Year High

Rental Prices Return to Levels from Over 10 Years Ago
Net Absorption Turns Negative Again

The office vacancy rate in Beijing, the capital of China, soared to its highest level in 13 years in the second quarter. Due to the economic downturn and a decrease in transaction volume, one out of every five offices is vacant.

On the 14th, Chinese economic media Caixin cited statistics from global real estate services company Savills, reporting that Beijing's office vacancy rate in the second quarter of this year reached 18.3%, up 1.5 percentage points from the previous quarter. This is the highest level in over 13 years since the first quarter of 2010 (18.4%).

High-rise buildings in downtown Beijing, China (Photo by Kim Hyun-jung)

Rents are also on the decline. According to multinational real estate asset management firm JLL, the average office rent in Beijing in the second quarter was 316 yuan per square meter (approximately 56,036 KRW), down 1.5% from the previous month. Current rents have fallen back to 2012 levels, setting the clock back 11 years.

The situation is noticeably worsening in Zhongguancun, considered the center of China's venture startups. As internet companies exit one after another due to poor performance and other factors, the office vacancy rate in this area continues to rise. According to JLL, the office rent in Zhongguancun in the second quarter was 351.6 yuan per square meter, down 8.36% year-on-year. The vacancy rate reached 13.9%, whereas before 2022, the vacancy rate in this area did not exceed 5%, Caixin explained.

Some tenants have reduced their leased space or moved out, resulting in a negative net absorption in Beijing's office market. A negative net absorption means that the area vacated by tenants during the reporting period exceeded the newly leased area. According to Savills, this figure has been negative for three consecutive quarters, recording -13,500 square meters in the second quarter of this year. The cumulative figure for the first half of the year reached -16,700 square meters.

A researcher from a market institution explained, "While there have been quarters when Beijing's office market absorption was negative, this is the first time since the compilation of Beijing office market statistics that the cumulative absorption for the first half of the year has been negative."

Given this situation, a tenant-favorable market has formed, prompting landlords to respond by extending lease periods partially free of charge, reducing rents, or bearing commission fees. A market insider said, "We expected the office market to revive significantly after the lifting of COVID-19 controls, but the rebound did not materialize. Rather, the market is quite depressed."

The atmosphere is similar in other regions. According to global real estate consulting firm Cushman & Wakefield, the vacancy rate of Grade A office buildings in Shenzhen, one of China's largest economic cities, reached a record high of 24.5% last month. Cushman & Wakefield forecasted, "Since Grade A buildings with over 1 million square meters of space will enter the market again this year, the vacancy rate is likely to rise further."

This content was produced with the assistance of AI translation services.