Office Building Market in Beijing to Pick Up after Olympic Games

Office Building Market in Beijing to Pick Up after Olympic Games, with Nearly Million Square Meters to Being Introduced

From Beijing Youth Daily

Business demand indicates that in the second half of the year, Beijing will have nearly 1 million square meters of office buildings being introduced to the market. Industry sources forecast that after the Olympic Games, the domestic economic trends will become a hot topic. Several media, including the International Herald Tribune, said the Chinese economy would continue to grow. At the same time, GE, UPS and other Olympic sponsors also indicated they would expand their business in China. The Olympic Games has attracted the attention of many international brands to the Beijing market. Although the economic trends will be mainly determined by the economic fundamentals and the allegations of the Olympic Games having a great push effect are not necessarily convincing, industry sources still believe that the business boom arising from the Olympic Games will continue to be a favorable factor for the office buildings in the capital city in the post-Olympic time. It is particularly so to the class-A office buildings in the Financial Street, the CBD and other mature business districts which can fully meet the office requirements of international companies in China.

Rentals Continued to Rise in 2nd and 3rd Quarters and Supply Is Expected to Increase Sharply in 4th Quarter

In its recent report, Savills said that in the first half of the year, the rentals of the class-A office buildings in Beijing in the second quarter was up 6.6% over the first quarter and up 18.5% year-on-year. It was the fastest-growing quarter in the past seven years. In particular, the Financial Street and the East Second Ring Road regions posted a two-digit rental growth.

In the current 3rd quarter, delivery of office buildings is somewhat late due to delayed construction progress. But demand continues to be strong and rentals continue to grow relatively fast. It is expected that the stock accumulated in the previous quarters will erupt in the fourth quarter, with the overall supply growing tremendously.

This huge increase means a higher vacancy rate.

The hosting of the Olympic Games has not only boosted the city s image but also intensified the city s overall infrastructure investment. In particular, road and rail transport facilities have been improved, and the improved transport facilities will bring in more business activities. All these will thrive the office building market.

The office building market in Beijing has never experienced excess speculations in the past. As a result, investors have been relatively few and rentals have been relatively stable. The overall situation has been good, and the prices will have room for a steady price rise in the future. Said Li Wenjie, managing director of Centraline China for northern China region. He was upbeat about the trend of the office building market.

Urban Infrastructure Facilities Push Office Buildings to Suburbs

Jones Lang LaSalle, a professional realty consulting service company, recently issued a whitepaper, entitled The Greatest Olympic Legacy. This is the second whitepaper on the Olympic impact ever published by the company. This document analyzed the profound impact of subway expansion to regional development.

In particular, the document said that as the subway lines expand their coverage, new business centers will spring up in the suburban areas and this will gradually blur the existing boundaries of the office building markets in Beijing s downtown areas. As the rentals of the office buildings in the CBD and the Financial Street continue to rise, the tenants requiring large office spaces will be forced to move into the office buildings on the outskirts of the city so as to further expand their corporate scales under the precondition that their leasing costs will not rise sharply.

In the meantime, the government has also introduced relevant financial incentive policies for the Beijing Economic and Technological Development Zone, the Zhongguancun area and the Wangjing area and is actively preparing to building subways in some areas. Nokia, Microsoft, Nortel and Siemens are moving their office spaces to Beijing s suburban areas.

In the area where most of the Olympic venues are located, the transactions on the office building market become extremely active with the approach of the Olympic Games. Meanwhile, more office buildings and especially the class-A office buildings will be introduced to the market after the Olympic Games. The regional business market will be greatly heightened. The traffic network platform completed before the Olympic Games undoubtedly will be the major factor to heighten the quality of the whole area in the future.

Demand for High-End Office Buildings in Mature Areas Continued to Be Strong

In its whitepaper entitled The Greatest Olympic Legacy, Jones Lang LaSalle also emphasized the traditional business circles would continue to have favorable prospect. It cited the mature business district Xidan as an example. The main impact of improved subway network on this area will be that development will be further intensified and will bring about a robust growth of the property rentals and asset values.

Savills also said in a recent analysis report that the CBD core area posted the highest rental level in the second quarter, with the average month rental reaching RMB229.4 per square meter. The East Second Ring Road area and the Financial Street area all posted two-digit growth rates, respectively at 13.

2% and 10.5%. The Century Fortune Center in the CBD, the Ping an International Financial Center near the Main Store of Yansha and the Fortune Resource International Center in the Financial Street area that have been introduced to the market, and the Global Financial Information Center near the Financial Street and located at the intersection of the Subway loop line and line 4 that will be inaugurated in the near future have all attracted considerable attention.

Yang Letao, managing director of Lixiang Sunlight Realty Institution, believed that the future trend of Beijing s office building market as a whole is not clear and that rentals may experience a rational downward adjustment in the next quarter when lots of office buildings will be introduced to the market.

But he also emphasized that the high-end office buildings with ideal locations, high standards and excellent property management service will become the first choices of Chinese and foreign high-end customers because of their powerful advantage platforms and will maintain their advantages for a long time.

Office Buildings with International Background Have Higher Environmental and Energy-Saving Demands

Environmental and cultural concepts have become more popular during the Olympic Games. As more international brands move in after the Olympic Games, the energy-consuming commercial real estate projects must place greater emphasis on energy conservation and environmental protection in keeping with international trends.

The Beijing Century Fortune Center in the CBD area is the first major commercial building that has passed the U.S. LEED certification as green building. The Global Financial Information Center near the Financial Street has installed the intelligent central air-conditioning with the world s latest technology.

According to the project director, this technology has one energy-saving award in Japan and is being used on a high-end office building in China for the first time. The system cannot only save energy by more than 30%, but also solve the problem of cross pollution arising from indoor and outdoor air mixing.

It represents a new concept of commercial architecture in the world and also meets the national energy-saving and emission-reducing requirements.