Monday, September 21, 2009

China Slows Down: Beijing Office Real Estate Vacancy Bordering 25%

Those who are counting on China to lead the economic recovery may be in for a shock. Vacancy in real estate office space in Beijing is approaching 25%.

China Daily News reports that Beijing's office renting market declined further in the first half of this year with the average vacancy rate rising 2.3% to 21.8% in July. The numbers are based on a report released by Savills, a real estate service in China.

Grade A office's effective rent was in Beijing was 150.4 yuan ($22.12) per square meter a month in the Q2 2009, down 5.7% from Q1. Rents have dropped 16.% since the beginning of this year.
Analysts say the financial crisis and slowed economic growth are the causes for the office sector's downturn as the office renting market is closely related to the country's macro-economic performance.

To make matters worse, Beijing had 310,837 square meters of new office space coming on the market in the Q2, for a total of 8.18 million square meters available.

On the positive side, Beijing's current air quality is the best in a decade. This is also another sign that the economy is suffering ad industrial activity has greatly slowed down.

"Air quality in Beijing this year has been at the best level in a decade, the city's environment authorities said Friday."

Chart of China's ETF, FXI:

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