Tech firms drove huge demand for Beijing’s prime office space since 2019

Prime office space in Beijing has seen a surge in demand in the last three years as companies in the technology and finance sectors sought to move in or expand, according to a survey.

The total amount of premium office property rented out in the capital rose by 41 per cent between 2019 and 2022, real estate consultancy CBRE said in a report on Tuesday.

The survey found a 44 per cent jump in the space rented out in new office buildings. In existing buildings, tenants rented 9 per cent more space to expand their offices, while newcomers moved in to rent 30 per cent more space.

The data came from 138 grade A office buildings in the city that span a total area of 5.2 million square metres, with 2,753 companies as occupants. CBRE releases a report on Beijing’s premium office market every three years.

“Beijing’s grade A office market saw a leap forward in terms of quality and quantity over the past three years,” CBRE wrote in the report.

Overall, take-up of office space in Beijing and other Chinese cities slumped in the three-year period as strict Covid-19 measures stunted growth. However, the premium end of the market proved remarkably resilient, with businesses less exposed to the pandemic such as tech firms expanding.

CBRE said the new demand for office spaces came from companies that look to innovate, such as those in the financial technology, life sciences and telecoms sectors. Financial firms made up 30 per cent of the occupants of grade A offices, followed by technology, media and telecoms (TMT) companies with 21.6 per cent.

New supply in the market also drove demand for office spaces, CBRE said. Net absorption over the last three years was only lower than in the period between 2008 and 2010. The new Lize business area, in the city’s southern Fengtai district, was a popular choice for businesses to move to.

A tightening of regulations in the finance sector – for example, a crackdown on micro lending businesses – sparked a proliferation of smaller, more price-sensitive players. These firms were found to be leaving expensive areas such as Beijing’s central business district and heading to new offices in areas like Lize.

The rapid growth of the digital economy in China, given extra impetus by wave after wave of Covid-19 lockdowns, contributed to a more diverse TMT sector with more players. This allowed the sector to record the biggest increase in rental space.

CBRE expects more demand for prime office space from TMT firms in the next three years thanks to a more stable regulatory environment and bigger investments in artificial intelligence, big data and metaverse.

The financial sector is likely see more demand as well.

The consultancy firm believes non-banking businesses such as securities and asset management firms will continue to grow and expand. That optimism comes from China’s introduction of a registration-based IPO system as part of its reform of the capital market, which is likely to usher in bigger listings on the new Beijing Stock Exchange.

As well as financial and TMT companies, the pharmaceutical sector in Beijing also contributed to the robust activity in the office market, the report said.

Other industries likely to support the capital’s prime office market include high-end manufacturing and life sciences, CBRE said. South China Morning Post