China’s commercial real estate market expected to pick up in mid-2023, with more investment on the way

Demand in tier-one cities like Beijing and Shanghai should recover from a slight decline during the pandemic

Vacancy rate in Beijing will, however, climb to 20 per cent as a large slew of pent-up supply comes online, Colliers analyst predicts

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Premium office space has proved resilient to the effects of Covid-19 as investors tend to favour high-end properties in times of economic uncertainty. Photo: Reuters

Published: 8:00pm, 27 Dec 2022

Demand in China’s commercial real estate market will pick up in mid-2023 as part of a larger reopening of the country and subsequent economic revival, property analysts predict.

Demand in tier-one cities like Beijing and Shanghai should recover from a slight decline during the pandemic, though interest in lower-tier cities may continue to wane.

Premium office space has proved largely resilient to the effects of Covid-19 as investors tend to favour high-end properties in times of economic uncertainty. Lower grade space has taken a bigger hit.

In the Chinese capital, the vacancy rate of premium, or Grade A, offices rose 1 percentage point to 16 per cent in 2022, while monthly rent slipped 1.7 percentage point to 331.1 yuan per square meter, according to data from global real estate firm Colliers.

The vacancy rate for Beijing’s Grade B office market climbed 3.7 percentage points from a year ago to 15.6 per cent in 2022. Average rents dropped 5.6 per cent year on year.

“It takes time to restore market confidence and for companies to adjust their leasing strategy,” Charles Yan, managing director for North China at Colliers, said in a webinar on Monday.