Office Snapshot Q4 2016 Beijing MARKETBEAT Economic Indicators Grade A CBD Market Indicators Grade A CBD Rent & Vacancy Rate Supply Pipeline www.dtzcushwake.com Q2 16 Q3 16 Past 12-Month Growth GDP Growth 6.7% 6.7% Tertiary Sector Growth 7.6% 7.3% CPI Growth 1.2% 1.2% Q3 16 Q4 16 12-Month Forecast Average Effective Rent* (RMB/sq m/mo) 403.2 409.5 Vacancy Rate 4.5% 5.0% 0% 2% 4% 6% 8% 200 220 240 260 280 300 320 340 360 380 400 Vacancy Rate (%) Rent (RMB/sq m/mo) Overall Rent Vacancy Rate (%) Source: Beijing Statistics Bureau 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2017 2018 2019 2020 Lettable Office Area (‘000 sq m) Core Submarkets Emerging Submarkets 10 year (2007–2016) Historical Average= 647,000 sq m BEIJING OFFICE Economy Beijing’s GDP increased 6.7% over the first three quarters. The city’s tertiary industry expanded 7.3% y-o-y for the year at the end of Q3, up 1.1 percentage points over the same period in 2015. Market Overview Demand for office space continued to be strong in Q4, with net absorption amounting to 785,000 sq m for the year. Wangjing- Jiuxianqiao was the most active submarket, accounting for 22.9% of transaction volume, followed by the Lufthansa submarket at a 16.3% share. Robust demand was the main driving force behind rental increases in the city. Grade A offices averaged a gross effective rent of RMB387.2 per sq m per month at the end of Q4, up 0.9% q-o-q. The five core submarkets recorded a gross effective rent of RMB409.5 per sq m per month on average, up 1.6% q-o-q. The Zhongguancun, Financial Street and Lufthansa submarkets achieved the strongest rental growth among submarkets. New office supply in Q4 included Emperor, Lei Shing Hong Plaza Phase II Tower B, Jinhui Building, Kaisa Plaza and Central Park Plaza. These added a combined 267,220 sq m of Grade A offices and helped lift the city’s annual new supply to 1,012,430 sq m, the highest mark since 2008. Strong pre-leasing activity limited a significant rise in the vacancy rate, which increased 0.8 percentage points q-o-q to 6.6% at the end of Q4. Availability in the five core submarkets remained stable at 5.0%, up 0.5 percentage points q-o-q. Domestic companies dominated leasing activity, comprising 81.3% of all transactions. Finance, high-tech and professional services firms ranked as the top three sectors, accounting for 40.2%, 22.6% and 14.9% of volume, respectively. Outlook In 2017, approximately 2.38 million sq m of new office supply is scheduled to launch. This will create both challenges and opportunities in Beijing’s office market. Ahead, Beijing’s July 2016 policy notice regarding real estate taxes will take effect. The government policy could result in a tax hike on landlords, resulting in additional costs passed on to tenants down the road. We will closely monitor implementation and a possible rental increase spurred by the new policy over the next year.
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Office Snapshot Q4 2016Beijing
MARKETBEAT
Economic Indicators
Grade A CBD Market Indicators
Grade A CBD Rent & Vacancy Rate
Supply Pipeline
www.dtzcushwake.com
Q2 16 Q3 16Past 12-Month
Growth
GDP Growth 6.7% 6.7%
Tertiary Sector Growth 7.6% 7.3%
CPI Growth 1.2% 1.2%
Q3 16 Q4 1612-Month
Forecast
Average Effective
Rent* (RMB/sq m/mo)403.2 409.5
Vacancy Rate 4.5% 5.0%
0%
2%
4%
6%
8%
200
220
240
260
280
300
320
340
360
380
400
Vacancy
Rate
(%
)
Ren
t (R
MB
/sq
m/m
o)
Overall Rent Vacancy Rate (%)
Source: Beijing Statistics Bureau
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
2017 2018 2019 2020
Lettable
Offic
e A
rea (
‘000 s
qm
)
Core Submarkets Emerging Submarkets
10 year (2007–2016) Historical Average= 647,000 sq m
BEIJING OFFICEEconomyBeijing’s GDP increased 6.7% over the first three quarters. The city’s
tertiary industry expanded 7.3% y-o-y for the year at the end of Q3,
up 1.1 percentage points over the same period in 2015.
Market OverviewDemand for office space continued to be strong in Q4, with net
absorption amounting to 785,000 sq m for the year. Wangjing-
Jiuxianqiao was the most active submarket, accounting for 22.9% of
transaction volume, followed by the Lufthansa submarket at a 16.3%
share. Robust demand was the main driving force behind rental
increases in the city.
Grade A offices averaged a gross effective rent of RMB387.2 per sq
m per month at the end of Q4, up 0.9% q-o-q. The five core
submarkets recorded a gross effective rent of RMB409.5 per sq m
per month on average, up 1.6% q-o-q. The Zhongguancun, Financial
Street and Lufthansa submarkets achieved the strongest rental
growth among submarkets.
New office supply in Q4 included Emperor, Lei Shing Hong Plaza
Phase II Tower B, Jinhui Building, Kaisa Plaza and Central Park
Plaza. These added a combined 267,220 sq m of Grade A offices
and helped lift the city’s annual new supply to 1,012,430 sq m, the
highest mark since 2008. Strong pre-leasing activity limited a
significant rise in the vacancy rate, which increased 0.8 percentage
points q-o-q to 6.6% at the end of Q4. Availability in the five core
submarkets remained stable at 5.0%, up 0.5 percentage points q-o-q.
Domestic companies dominated leasing activity, comprising 81.3% of
all transactions. Finance, high-tech and professional services firms
ranked as the top three sectors, accounting for 40.2%, 22.6% and
14.9% of volume, respectively.
OutlookIn 2017, approximately 2.38 million sq m of new office supply is
scheduled to launch. This will create both challenges and
opportunities in Beijing’s office market.
Ahead, Beijing’s July 2016 policy notice regarding real estate taxes
will take effect. The government policy could result in a tax hike on
landlords, resulting in additional costs passed on to tenants down the
road. We will closely monitor implementation and a possible rental
increase spurred by the new policy over the next year.
Olympic Games Village (OGV) 557,039 14.4% 136,854 341,651 369.8 4.9 4.7
Beijing Development Area (BDA) 474,648 20.3% 30,000 - 159.6 2.1 2.0
Li‘ze Financial Business District - - - 1,439,717 - - -
Others* 179,353 - 109,995 563,042 - - -
BEIJING Overall Grade A Total 9,302,079 6.6% 1,012,430 7,285,753 387.2 5.2 5.0
Key Leasing Transactions Q4 2016
PROPERTY SUBMARKET TENANT SQ M LEASE TYPE
Oriental Plaza East 2nd Ring Road Roche Diagnostics 4,145 Renewal
Tian Run Fortune Center East 2nd Ring Road EDF 3,600 Relocation + Expansion
Beijing IFC CBD AstraZeneca 3,048 Renewal
Winland Int'l Center Financial Street Bloomberg 2,058 Renewal
Oriental Plaza East 2nd Ring Road Zhong Ou Asset Management 1,640 Relocation
Fortune Financial Center CBD China Orient Asset Management 1,401 Relocation
Oriental Plaza East 2nd Ring Road Diaoyutai MGM Hospitality 1,197 Renewal
UBP WangJing-Jiuxianqiao SONY 1,073 Relocation
Winland Int'l Center Financial Street Royal Bank of Canada 925 Renewal
Significant Projects Under Construction
PROPERTY SUBMARKET MAJOR TENANT SQ M COMPLETION DATE
Hademen Plaza Other (Caishikou) - 86,000 Q1 2017
China World Trade Centre IIIB CBD - 71,429 Q1 2017
Aojin Building OGV - 71,000 Q1 2017
Metro Park Li‘ze - 250,000 Q2 2017
International Electronic Headquarter WangJing-Jiuxianqiao 160,000 Q2 2017
World Profit Center II Lufthansa - 48,957 Q3 2017
China Overseas Fortune Center OGV - 80,000 Q4 2017
Joy City Property Limited Building East 2nd Ring Road - 100,000 Q4 2017
Samsung Headquarters Building (Z2b) CBD - 120,000 Q1 2018
* Projects of others not belonging to any of the above submarkets.
** Effective Rent is calculated based on gross floor area and assuming a letting mid floors for a typical three-year lease term with rent-free periods factored in.
About Cushman & WakefieldCushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop and live. The firm’s 43,000
employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world. In
Greater China, the firm has a co-branded presence under the name of DTZ/Cushman & Wakefield and operates 20 offices in the region. Cushman &
Wakefield is among the largest commercial real estate services firms with revenues of $5 billion across core services of agency leasing, asset services,
capital markets, facility services, global occupier services, investment & asset management, project management, tenant representation and valuation &
advisory. To learn more, please visit www.dtzcushwake.com or follow us on Weibo/WeChat (DTZ_China).
DisclaimerThis report has been produced by DTZ/Cushman & Wakefield for use by those with an interest in commercial property solely for information purposes. It is
not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which
DTZ/Cushman & Wakefield believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete.
No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and DTZ/Cushman
& Wakefield shall not be liable to any reader of this report or any third party in any way whatsoever. DTZ/Cushman & Wakefield shall not be held responsible
for and shall be released and held harmless from any decision made together with any risks associated with such decision in reliance upon any expression of
opinion in the report. Our prior written consent is required before this report can be reproduced in whole or in part.
to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.
About Cushman & WakefieldCushman & Wakefield is a global leader in commercial real estate services, helping clients transform the way people work, shop, and live. The firm’s 43,000
employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world.
Cushman & Wakefield is among the largest commercial real estate services firms in the world with revenues of $5 billion across core services of agency
leasing, asset services, capital markets, facilities services (branded C&W Services), global occupier services, investment management (branded DTZ
Investors), tenant representation and valuations & advisory. To learn more, visit www.dtzcushwake.com or follow @Cushwake on Twitter.
SUBMARKETINVENTORY
(SQ M)VACANCY RATE
NEW COMPLETIONS
YEAR-TO-DATE
(SQ M)
UNDER
CONSTRUCTION
(SQ M)
GRADE A FACE RENT*
RMB/SQ M/MO US$/SF/MO EUR/SF/MO
Tianhe Sports Center 826,963 3.6% 0 0 ¥170.7 $2.3 $2.2
Zhujiang New Town 3,150,141 13.2% 631,152 281,000 ¥179.7 $2.4 $2.3
About Cushman & WakefieldCushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop and live. The firm’s 43,000
employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world. In
Greater China, the firm has a co-branded presence under the name of DTZ/Cushman & Wakefield and operates 20 offices in the region. Cushman &
Wakefield is among the largest commercial real estate services firms with revenues of $5 billion across core services of agency leasing, asset services,
capital markets, facility services, global occupier services, investment & asset management, project management, tenant representation and valuation &
advisory. To learn more, please visit www.cushmanwakefield.com or follow us on Weibo/WeChat (DTZ_China).
DisclaimerThis report has been produced by DTZ/Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It
is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources
which DTZ/Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete.
No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and DTZ/Cushman
& Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change.
Our prior written consent is required before this report can be reproduced in whole or in part.
to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.
About Cushman & WakefieldCushman & Wakefield is a global leader in commercial real estate services, helping clients transform the way people work, shop, and live. The firm’s 43,000
employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world.
Cushman & Wakefield is among the largest commercial real estate services firms in the world with revenues of $5 billion across core services of agency
leasing, asset services, capital markets, facilities services (branded C&W Services), global occupier services, investment management (branded DTZ
Investors), tenant representation and valuations & advisory. To learn more, visit www.dtzcushwake.com or follow @Cushwake on Twitter.
considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.
About Cushman & WakefieldCushman & Wakefield is a global leader in commercial real estate services, helping clients transform the way people work, shop, and live. The firm’s 43,000 employees in more
than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world. Cushman & Wakefield is among the largest
commercial real estate services firms in the world with revenues of $5 billion across core services of agency leasing, asset services, capital markets, facilities services (branded
C&W Services), global occupier services, investment management (branded DTZ Investors), tenant representation and valuations & advisory. To learn more, visit
www.cushmanwakefield.com or follow @Cushwake on Twitter.
SUBMARKETINVENTORY
(SF NET)AVAILABILITY
UNDER
CONSTRUCTION
(SF NET)
GRADE A NET EFFECTIVE RENT
HK$/SF/MO US$/SF/MO EUR/SF/MO
Prime Central 7,540,999 3.1% 0 134.21 US$17.29 € 16.56
Greater Central (CBD) 15,445,040 4.2% 0 120.09 US$15.47 € 14.81
Wan Chai / Causeway Bay 8,816,654 6.3% 498,400 72.98 US$9.40 € 9.00
Hong Kong East 7,354,079 4.2% 1,676,500 47.42 US$6.11 € 5.85
Hong Kong South 1,972,175 14.0% 445,100 29.36 US$3.78 € 3.62
Hong Kong Island Total 33,587,948 5.3% 2,620,000 84.42 US$10.87 € 10.41
Kowloon Total 25,904,994 9.6% 3,806,600 42.15 US$5.43 € 5.20
Overall Total 59,492,942 7.2% 6,426,600 78.79 US$10.15 € 9.72
Key Leasing Transactions Q4 2016
PROPERTY SUBMARKET TENANT SF LEASE TYPE
Lot NKIL 6512 – Hoi Bun Road Kowloon East JP Morgan 225,000 Relocation
COS Centre Kowloon East Bank of Communications 39,300 Relocation
Two Pacific Place Greater Central Huarong 32,300 Expansion
Manulife Financial Centre Tower B Kowloon East Crown Motors 30,700 Relocation
The Gateway – Tower 1 Tsimshatsui AIA 24,300 Expansion
*Grade A Net Effective Rent is exclusive of service charges and government rates and based on net area. US$/HK$ = 7.763; €/HK$ = 8.106 as at 23 December 2016
Significant Projects Under Construction
PROPERTY SUBMARKET DEVELOPER SF COMPLETION TIME*
18 King Wah Road Hong Kong East Henderson 256,000 Q3 2017
Junction of Hang Yip Street, Wai Yip Street Kowloon East Mapletree 532,000 Q4 2017
Hong Kong K11 Office Tsimshatsui New World 283,000 Q4 2017
Lee Garden Three Wan Chai / Causeway Bay Hysan 349,000 Q4 2017
Junction of Wang Chiu Road and Lam Lee Street Kowloon East Swire 511,000 Q3 2017
Contacts
John Siu James Shepherd Catherine Bai
Managing Director Managing Director Manager, Hong Kong Research
16/F, Jardine House Research, Greater China 16/F, Jardine House
1 Connaught Place, Central, Hong Kong 1366 Nanjing West Road, Shanghai 1 Connaught Place, Central, Hong Kong
About Cushman & WakefieldCushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop and live. The firm’s 43,000
employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world. In
Greater China, the firm has a co-branded presence under the name of DTZ/Cushman & Wakefield and operates 20 offices in the region. Cushman &
Wakefield is among the largest commercial real estate services firms with revenues of $5 billion across core services of agency leasing, asset services,
capital markets, facility services, global occupier services, investment & asset management, project management, tenant representation and valuation &
advisory. To learn more, please visit www.dtzcushwake.com or follow us on Weibo/WeChat (DTZ_China).
DisclaimerThis report has been produced by DTZ/Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It
is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources
which DTZ/Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete.
No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and DTZ/Cushman
& Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change.
Our prior written consent is required before this report can be reproduced in whole or in part.