Beijing Apartments Market Overview and Outlook

In 3Q09, demand for office apartments in Beijing continued to pick up, with domestic financial institutions taking the lead, as evidenced by several significant leasing transactions concluded during the quarter. Despite some landlords beginning to raise their rents, most leasing transactions in the quarter were closed in brand new apartment buildings, while most landlords continued to lower rentals to attract and/or retain tenants. Many new apartment projects had to postpone their completion dates as a result of the enhanced security measures put in place for the celebration of the establishment of the PRC. Large-scale domestic corporations continued to take the lead in the local investment market. The prospects for Beijing’s apartment market became clearer, rebooting investment negotiations that had been bogged down by the global financial crisis just a couple of months ago.

Supply
There was no new supply in the Beijing Apartments in 3Q09

Demand
As at the end of the quarter, no strong demand for beijing apartments.

Rents
With more transactions in some particular properties and in observation of the growing leasing market, some landlords began to raise rents in 3Q09. Nevertheless, most leasing transactions in the quarter were closed in brand new apartment buildings.

Investment
Large-scale domestic corporations continued to take the lead in the local investment market. The positive outlook stemming from the bottoming out of the economy infused confidence into domestic investors, giving new life to investment negotiations that had stagnated during the global financial crisis.

Outlook
As discussed earlier, Beijing’s local economy has begun the process of recovery, and the Ministry of Finance announced that it will maintain its active fiscal policy in order to boost investment and consumption. These inspiring signals are having a positive effect on demand for local apartment space, and are expected to drive business upswings and expansions.

The Beijing office market is expected to see approximately 1.04 million sqm and 1.44 million sqm of new supply (including Grade A and Grade B space) in 4Q2009 and 2010, respectively, pushing the total stock up by 9.74% and 13.50% from its current level, respectively. The influx of new supply should continue to load up mounting pressure on many office property landlords, although the decline in rentals narrowed from 2Q09 to 3Q09. Colliers International expects rents to remain constant over the next two quarters.

As of now, most buyers of the en bloc sales transactions concluded in 2009 are domestic corporations and this trend is expected to continue over the short to medium term, given the current economic climate and existing domestic statutory environment. The upcoming REITs and the new insurance law implemented on 1 October are sure to attract more buyers to the local market.

update time：2010-7-30