Beijing's office vacancy rate on the rise

The vacancy rate of Grade-A office buildings in Beijing will rise to 7 to 8 percent at the end of 2015 as the supply exceeds the demand along with the slowdown of China's economic growth.

"In the second half of the year, seven Grade-A office building projects will come into the market, adding around 360,000- square meters to the total supply," said Dong Yue, the senior manager of the research and consulting department of Savills, a global real estate services provider.

The major market tends to move from the center of the city to the newly-developed areas such as Wangjing and Ya'ao district. The supply in these areas in the second half of the year will account for about half of the total supply in Beijing, according to Savills' research.

According to Dong, the total amount of new supply will reach 510,000- sq m, 91 percent higher than the past three years' average supply.

Meanwhile, companies cut budget on rental expense as the economic slowdown may lead to a slower business expansion.

Overall, demand for Grade-A office buildings is largely from financial and IT sectors, which accounts for 48 percent of the total market demand. Domestic companies are still the major customers, taking up 63 percent of the total demand.

Along with the fall in the demand, the average monthly rental price fell 0.3 percent month-on-month to 319.1 yuan ($51) per sq m after modest rise for four quarters in a row.

The rent dropped by 0.3 to 1.1 percent in most parts of east Beijing, while it remained steady in the west part including Zhong Guancun and Financial Street.

After steady increase for three consecutive quarters, the net absorption volume of the office buildings in Beijing slipped by 51.8 percent month-on-month to 68,000-square meters, a 21.8 percent drop year-on-year, according to a second-quarter report by Savills.

"The market in the booming areas of the city will recover and become more mature after the period of decline," said Dong.