Sky is the limit on office rents in Beijing

PUBLISHED : Thursday, 12 April, 2012, 12:00am
UPDATED : Thursday, 12 April, 2012, 12:00am

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Office rents in Beijing, which already outpaced almost 150 key cities around the world last year, are expected to jump another 30 per cent this year due to limited supply and growing demand, according to property consultant DTZ.

The company said in a report that the average rent for grade-A offices in Beijing rose to 277 yuan (HK$342) per square metre per month in the first quarter, up 12 per cent from the previous quarter and 48 per cent higher than a year earlier.

'This strong growth will continue till 2015, as the premium office supply will not be able to catch up with the increasing demand,' said Wei Dong, the research head of DTZ for Northern China.

The office occupancy cost in Beijing increased 38 per cent last year, the largest leap seen in a survey of 147 cities globally, according to a DTZ survey.

Soaring rents have been fuelled by a widening gap between supply and demand over the past two years.

DTZ estimated that Beijing would be home to 330,000 square metres of new office space this year, but the demand for space was expected to exceed 500,000 square metres.

Meanwhile, Wei added that the proportion of domestic companies in premium offices in Beijing had climbed to 49 per cent from 25 per cent over the past three years, although that trend might reverse from this year.

'As the office supply is limited, office owners in Beijing have more bargaining power,' she said.

'They usually prefer foreign companies to move in, to help boost their properties' image. They also believe that foreign tenants are easier to work with.'

Separately, government austerity measures to curb soaring prices imposed early last year are taking a toll on the industry.

Hangzhou Glory Real Estate on Tuesday became the first mainland property developer to file for bankruptcy, raising concerns more developers may have problems.

'We think this is an individual case, and cannot represent the market trend,' said Wei. 'Although many developers are short of cash, they are still far from bankruptcy.'

Investors have reacted to the downturn in the property outlook, marking down stocks of several major companies yesterday. China Resources Land dropped 1.43 per cent to close at HK$13.80, and KWG Property slumped 4.23 per cent to HK$4.75. Agile Property, Beijing Capital Land and Sino-Ocean also fell between 0.7 and 1.7 per cent.