Office space shortage fuels rent rise in Beijing
Doubled leasing costs since 2008 make capital the most expensive after HK and London
John Wong, has leased 60 per cent of the space in Beijing's 61-storey Fortune Financial Centre, which was completed in September last year, and is confident the rest will be snapped up.
Tenants at the tower, built by HKI China Land, included financial companies such as HSBC and DBS, said Wong, HKI's head of asset management.
"It's such a good time," he said. "Companies still have the urge to expand, the financial sector that we focus on remains healthy, and we face relatively small competition because supply is limited."
Rising demand and limited supply have doubled office rents in Beijing since 2008, making its Finance Street the world's third-most expensive behind Hong Kong's Central and London's West End, according to real estate broker CBRE.
CBRE Research director Frank Chen said office rents in Beijing would rise 3 per cent to 5 per cent in the next two years.
"Beijing has more upside potential than Shanghai, particularly for the next two to three years," Chen said. "The rents are much higher, but they're just not falling back because supply is so scarce."
CBRE said 3 million square metres of new office space would be completed in Shanghai this year and next, compared with an annual average of just 270,000 sqmetres in Beijing between last year and next.
New supply in Beijing hit a peak of 1.25 million sqmetres in 2008. The construction boom was due to developers rushing to finish projects ahead of the 2008 Beijing Olympics.
Development has been slow to restart while much of the new space has been taken by state firms. Between 2009 and 2012, 2.2 million sqmetres of grade A offices were completed, with only half that for lease in the private market, according to a report by broker Jones Lang LaSalle.
Corporations have rented an average 590,000 sqmetres a year in Beijing since the Olympics, more than double the 240,000 sqmetres of new workspace added in the period, according to CBRE. That pushed rents to 413 yuan (HK$515) a square metre per month in the fourth quarter of last year, compared with 250 yuan in Shanghai, it said.
The restricted supply contrasted with the rest of the mainland, where new office space rose to a record 1.77 million sqmetres in the fourth quarter, CBRE said in January.
Beijing does not have a lot of spare commercial land in the city centre for buildings and many projects were completed in the lead up to the Olympics, Chen said.
"The supply is very tight in the Beijing office market," said Zhang Xin, the chief executive of Soho China, the largest developer in central Beijing.