Beijing Office Rents Outstrip New York

Office rents in Beijing have soared over the past two years, making it more expensive to lease prime work space in China’s capital than in New York, according to an industry survey.

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A boom in demand and limited supply of high-quality space catapulted Beijing to fifth place in a list of the world’s priciest office locations which was compiled by Cushman & Wakefield, a commercial property services firm

Hong Kong retained the top spot, followed by London, Tokyo and Moscow. New York was sixth, just behind Beijing.

Prime office rents in Beijing’s central business district rose 75 per cent last year, the fastest globally, and up from a 48 per cent increase in 2010, according to the survey.

It now costs $130 a year for a square foot of a top-grade office in Beijing, compared with $239 in London’s West End and $120 in midtown Manhattan.

The boom was not confined to Beijing. Prime office rents in Shanghai also jumped last year, rising 24 per cent, according to Cushman & Wakefield.

Andy Zhang, China managing director for Cushman & Wakefield, said: “With a single-digit record low vacancy rate and not much quality supply foreseeable in the coming years, we expect Beijing and Shanghai to maintain the landlords’ market position in 2012, but the rental growth will slow.”

Beijing plans to double the size of its central business district by 2017 in a vast eastward expansion.

Rents have been rising in other parts of the city, although not as quickly, including in a high-tech zone and a financial district that are far from the central business area. There has also been a proliferation of lower-quality office space and government buildings in the Chinese capital, which were not included in the survey.

The surge in office rents in China’s top cities comes as other parts of the country’s property market have cooled considerably. Housing prices have started to edge down nationwide after climbing at a double-digit pace two years ago.

That decline stems from a concerted government campaign to deflate what it saw as an overheated property market. But its efforts have focused on the residential sector, in part because a lack of affordable housing had become a serious public concern.

The government’s various tightening measures – from higher mortgage rates to a restriction on the number of homes people can buy – have not applied to the office sector, so relief for businesses that are looking for leases may still be some time off.

“Tenants need to have a strategy to live through this high-rental, low-vacancy period,” Mr Zhang said.