The rent of Grade A office buildings in Beijing has dropped by another 6.2%, while the demand has somewhat rebounded.

Increasing the rent concession range to exchange for the rental rate is still the consensus of most office building owners.

The latest report released by JLL shows that in the whole year of 2024, the leasing transaction volume of Grade A office buildings in Beijing increased by 22% year-on-year, and the transactions picked up. Among them, the number of transactions and the average transaction area in the area segment of more than 10,000 square meters increased by 44% and 35% respectively year-on-year, and the proportion of new leasing demand was about 50%.

There are two main reasons for the recovery of transactions. One is that the National Financial Information Building in Lize Business District entered the market, and the owner and its affiliated enterprises moved in on a large scale, and the individual case drove the rise of the overall market data; the other is that as the rent of Grade A office buildings continues to decline, some enterprises move from sub-grade office buildings to Grade A office buildings, bringing new leasing demand.

Behind the recovery of transaction volume, the actual market demand is still under pressure, and the market game is fierce, resulting in the continuous decline of the rent level.

The report shows that the rent of Grade A office buildings in Beijing's office building market decreased by 16.1% year-on-year in 2024, and the average rent dropped to 251 yuan/square meter/month. Among them, the rent in the fourth quarter dropped by 6.2% compared with the previous quarter.

Data source: JLL Research Department

Under the fierce market competition, increasing the rent concession range to exchange for the rental rate has become the consensus of most owners, and the willingness to attract or retain tenants with more incentive policies is also continuously increasing.

Zhang Siliang, Senior Director of JLL Beijing Commercial Real Estate Department, said that the "extreme price" - that is, the situation where the rent is much lower than the market average rent in the case of new lease or lease renewal - occurs in all sub-markets. The new lease extreme prices in the six sub-markets of CBD, Olympic Area, Third Embassy District, Financial Street, Wangjing and Lize are even more than 30% lower than the average rent of their sub-markets. Only the Third Embassy District and Financial Street business district show a trend of increasing industry concentration.

By the end of 2024, the vacancy rate of Grade A office buildings in Beijing rose to 12.6%. The willingness of office building owners to attract or retain tenants with more incentive policies is continuously increasing. The mainstream trend of the market in 2025 is still to exchange quantity for price.

"It is expected that the rent of Grade A office buildings in Beijing will be reduced by 14.8% in 2025," Zhang Siliang said. "The continuous exertion of the policy 'combined punch' reflects the determination to promote economic stability and boost confidence, but the transmission and transformation of policy effectiveness still need time, and the prominent crux of the insufficient effective demand in the office building market still needs to be solved. In the future for a period of time, tenants may continue to look for opportunities to save costs or upgrade quality, prompting owners to actively adjust the leasing strategy to win customers and seize the market opportunity."

Image source: JLL

By industry, the financial industry and the technology and Internet industry are the main demand drivers of the Grade A office building market in the fourth quarter. Securities companies integrate office spaces, driving the leasing transaction volume of the financial industry to the top. The demand of the technology and Internet industry represented by games and artificial intelligence maintains a moderate recovery.

On the whole, the demand changes in the current Grade A office building market present three main characteristics:

• In 2024, the office location strategy of enterprise tenants shows a more prominent priority change. More enterprises give priority to absolute rental cost control rather than industry concentration.
• With the normalization of bidding, it is expected that the rent gap between sub-markets of Beijing's office buildings will continue to narrow, and the flexibility of enterprises' choice of sub-markets may continue to increase.
• Although the leasing market is under pressure, Beijing's investment market remains active, with a total transaction volume of 42.7 billion yuan throughout the year, and office buildings are still the most important transaction category.