Posts Tagged ‘Beijing’

Residential Lease Report - Beijing - January 2011

Thursday, February 10th, 2011

Rents continue to climb. With Beijing expat numbers rising and with limited new supply on the horizon, this trend will probably continue.

In 2010, China attracted $106bn of foreign direct investment (excluding investments in financial instruments such as shares). An increase of 17.4% from 2009, according to the Ministry of Commerce. Enough to more than reverse the 2.3% fall seen during 2008. (source: BBC 18 Jan 2011).

Beijing has seen sharp increases in office space occupancy. Foreign companies, especially in the mining, infrastructure and technology have grown their operations and increased foreign staff. There’s also been a rise in medium sized foreign companies setting up offices in the city. German companies in particular have been prominent in this surge.

International school’s are always a good indicator of expatriate relocation trends. Waiting lists at Beijing’s two main international schools, WAB and ISB, are now at peak 2007 levels. In 2009 there were were no waiting lists at these two schools. At Beijing’s German School, there are now waiting lists for several age groups. This has not occurred before.

Supply of quality expat-friendly properties has not kept pace with demand. One reason is that the government is encouraging developers to build low-cost housing and discouraging lower density luxury developments, both in the city and in suburban Shunyi. Lofty property prices also mean that for landlords who purchase properties now, rental returns have dropped from lofty 15% to close to zero. For new investors, rents today fall far short of monthly mortgage payments.

In the city, Gemini Grove and Sanlitun SOHO were the only expat-friendly city apartment complexes to open in 2010. Park Avenue and Central Park remain the most popular mid-tier city expat residential communities. Both have seen rent increases of up to 11-37% (see below). Unusually, it is the 3 to 4 bedroom apartments that have undergone the highest increases. With the completion of high-end office towers at China World Tower 3 and WFC, both within walking distance, demand at Central Park will remain strong.

Embassy House is still Beijing’s most exclusive luxury apartment development. Despite high occupancy and premium rents, Embassy House has not had a viable competitor since opening in 2002. A competitor, The Ascott, has closed. As have East Gate Plaza and Yong He Villas, either because the buildings have been sold, or because apartments are being upgraded.

In suburban Shunyi, Rose & Gingko is the only viable new villa residential community. Occupancy climbed steadily in 2010. Interestingly, the Rose & Gingko developers sold their houses fully fitted-out making them ready to lease for landlords. This contrasts with the earlier trend of selling villas as bare-concrete shells, leaving the individual landlord to carry out all fit-outs. Yosemite houses were sold bare-shell. There are several downsides. Quality and decor varies, often not meeting expat standards. Also, the property management has difficulty doing repairs as the materials and appliances at each house differ.

River Garden, Yosemite and Beijing Riviera and the more exclusive Grand Hills remain solid expat favourites. Expat occupancy is heavily clustered at these four developments. Increased relocations have meant year-on rent hikes of 10-18% (see below). The other ten Shunyi villa communities have not managed to attract the all-important expat numbers either because of deterioration, or because of poor quality fit-outs.

Last June, Mercer’s Expatriate Cost of Living index, ranked Beijing 16th in the world behind Milan, and 6th in Asia, behind Seoul. The city’s continuing rent increases suggest the capital will at the very least retain its place on the ladder. Supply will remain limited for the foreseeable future. We don’t see viable expat-friendly properties (in terms of rent, location, quality and  interior decor) being launched in 2011.

Median Residential Rents *

Embassy House (City High-End)

- Apartment 2bed 213sqm RMB38,000/mth [Year on Increase 26.7% - RMB30,000/mth]
- Apartment 3bed 314sqm RMB55,000/mth [Year on Increase 22.2% - RMB45,000/mth]

Park Avenue (City Mid-Tier)

- Apartment 1bed 97sqm RMB9,500/mth [Year on Increase 18.8% - RMB8,000/mth]
- Apartment 2bed 150sqm RMB16,000/mth [Year on Increase 33.3% - RMB12,000/mth]
- Apartment 3bed 178sqm RMB22,000/mth [Year on Increase 37.5% - RMB16,000/mth]

Central Park 3-4 Phase (City Mid-Tier)

- Apartment 1bed 88sqm RMB10,000/mth [Year on Increase 11.1% - RMB9,000/mth]
- Apartment 2bed 139sqm RMB18,000/mth [Year on Increase 33.3% - RMB13,500/mth]
- Apartment 3bed 188sqm RMB24,000/mth [Year on Increase 33.3% - RMB18,000/mth]

Yosemite C-type (Suburban House)

- House 3bed 356sqm RMB36,000/mth (Townhouse 4bed) [Year on Increase 12.5% - RMB32,000/mth]
- House 4bed 425sqm RMB46,000/mth (Semi-D 4+1bed) [Year on Increase 15% - RMB40,000/mth]

Beijing Riviera - Upgraded (Suburban House)

- House 3+1bed 250sqm RMB35,000/mth (Type C 4bed) [Year on Increase 16.7% - RMB30,000/mth]
- House 4+1bed 406sqm RMB45,000/mth (Type B 4bed) [Year on Increase 12.5% - RMB40,000/mth]

* Note that these are median rents of a representative sample at each development. Actual rents vary up or down depending on specific unit and specific rent terms.

Released: 9 February 2011

A Softer Market

Thursday, February 19th, 2009

Cakes and fruit baskets are always welcome at our office, but less so when it’s an enticement. Since December last year sales teams from Beijing’s top-tier serviced apartments have been bearing gifts when dropping by to say “Hello”. Always the first to react,  rents at  Embassy House and Ascott have been slashed by 15-20%. They’re also offering more flexible lease terms to maintain occupancy levels. A lower floor 2 bedroom apartment at Embassy House now rents for RMB28,000/month. Compare that to last years’ rent of RMB35,000/month.Individual landlords are following suit with similar drops at apartments such as  Park Avenue and  Central Park. In suburban Shunyi we’re seeing a similar drops in rent levels at  YosemiteRiver Gardenand  Beijing Riviera.With no viable new supply coming online, we expect occupancy to remain high at the main expat residential communities. Landlords at less popular communities, and also at older or poorly renovated properties may face tougher times if they don’t renovate or make large rent adjustments.There’s no doubt that our clients are tightening their belts and on the look out for cost savings. Still, January was an unusually busy month for us. But with the month’s  33% drop in foreign direct investment, we’re cautious about this summer’s expat relocation season.On a side-note, in an effort to stimulate lacklustre sales, the government has lifted the 12-month prior residency requirement for foreigners wanting to buy property in China.

Taxi take on Olympic traffic

Monday, September 15th, 2008

Five days from now Beijing’s drivers will be able to hit the roads each day without having to consider whether it’s an even or odd calendar day. Since the 20th of July traffic load restrictions have been in force. Besides keeping half the city’s private cars off the road, heavy trucks have been banned from coming within the 5th Ring. Curious, I struck up a conversation with one of the city’s many friendly cabbies kicking off with, “Did the restrictions increase your daily fares?”. Surprisingly, he claimed only a 10% rise in takings.

The designated Olympic lanes on major arteries meant that traffic levels were close to normal. Also, he noted a sharp drop in domestic tourism during the games. “Provincial visitors flock to shopping centres at weekends and take taxis as they don’t know how to use public transport. But they’ve stayed away during the Olympics.” he said. It wasn’t so bad during the first 3 weeks as he’d get 7-8 foreign tourist fares a day, but since then it’s been relatively slow, especially at the end of the week. Of course, one taxi driver does not a survey make, but an interesting insight nevertheless.

Beijing Residential Rentals - 12 month outlook

Thursday, July 31st, 2008

On the demand side, rents are dependent on foreign investment levels and the knock-on effect of increases in foreign staff. China does not yet appear to have been affected by shaky global sentiment. As for supply, we anticipate a drop in viable new residential developments coming on-line. In suburban Shunyi, where Beijing’s expatriate families live, it’s unlikely that opulent  new developments, ready soon, will appeal to expatriates. Increases in supply will be from landlords renovating older houses. Although there’s an abundance of land in the district, recent developments have been for retail space or commercial projects like the new Beijing Exhibition Centre.

In prime Chaoyang neighbourhoods developers are moving up-scale, choosing to only build luxury properties. Chevalier at Sanyuan Qiao is a typical example. Expatriates seeking new 2 bedroom apartments with rent budgets below RMB15,000/month will need to look further afield as future mid-tier properties will be built to the East and South of the CBD. Despite the added distance, new subway lines will continue to allow an easy commute.

Although the Olympics raised expectations in the Spring amongst some mid-tier landlords, it was only for short-term August rentals. Rents for villa and luxury apartments have always been immune to the Olympic effect. For the coming 12 months we expect rents to remain stable at solid developments like Park Avenue, Central Park and Yosemite. However, with poor occupancy since launch, we anticipate drops in rents at developments less popular with expatriates such as Rits Garden, Cathay View and Orchid Garden.
We do expect a slight surge in replacements in summer 2009 due to corporations having postponed rotations for expatriate families in 2008 because of the games. Note that expatriates whose rent allowances are tied to the dollar may feel the pinch if RMB appreciations continue.

Olympic Rents

Thursday, July 24th, 2008

We saw it coming when Ascott serviced apartments placed an Olympic themed full-page advert on the back page of a magazine two weeks ago. Not wanting to seem glib, but we predicted this back in August 2007. Asking rents at 3-5 times the norm at many hotels and serviced apartments were ridiculous. Yesterday’s article on Bloomberg shed more light on the market. With corporate clients having booked well in advance, the money’s in the bank at the city’s premier hotels. For others, getting premium rents may be a struggle. We know of one high-end serviced apartment in the city that’s officially maintaining the premium Olympic rate but at the same time is discretely offering standard rates to some clients.

Commuting in Beijing

Thursday, July 24th, 2008

It’s an even number plate day today. With half the city’s privately owned cars off the road, traffic is running smoothly. Secondary roads are free-flowing but there’s still significant traffic on main arteries like Changan Jie at peak hours.

The #10 subway that runs along the East 3rd Ring has just opened putting Chaoyang Park, Sanlitun and Lufthansa Centre within a short stroll of a station. It took a few days for Beijingers to get acquainted with it but the new swipe card ticketing system is running well too. Fares are still at a flat RMB2.00 irrespective of destination. Will they increase and become destination dependent as in Shanghai? The hardware’s certainly there.

Our handy new Beijing subway map can be downloaded here.

Tremors in the CBD

Monday, May 12th, 2008

CBD tremoursAt about 14:40, we felt a gentle swaying in our 21st floor office. Within minutes, we’d walked down the stairs and joined the thousands in the street below. The mobile networks were overloaded.

The epicentre of the 7.8 quake was in a mountainous region of Sichuan.  As I write, Rueters is reporting casualties in the southern region. The tremors in Beijing registered 3.9.

Yuan value

Monday, January 14th, 2008

As the CNY climbs to 7.27 against the USD, was interesting to read this week’s Economist citing two reasons, neither of which involve Washington:

- Reducing imported inflation, especially for food and raw materials. A question mark is placed on the efficacy of interest rate hikes in stemming inflation that is attributed to “supply-side shocks”.
- Snow-balling costs of holding down the CNY with falling interest rates in the US vs. rising rates in China.

The article notes: “Some economists argue that a big one-off revaluation would help to stem inflows by reducing the expected future appreciation of the yuan. But Chinese policymakers have stressed the need for gradual adjustment. To show that the currency is not just a one-way bet, the PBOC may try to nudge the yuan a bit lower in coming days.”

With rising rents in a lofty ‘08 (am refraining from using the “O” word) coupled with housing budgets set in USD, the data gatherers at firms like ECA will be under pressure not to under quote.

Source: Economist

China World Tower 3

Friday, December 14th, 2007

China World Tower 3 nearing completionWith the main structure complete, the media has given a lot of attenti   on to Rem Koolhaas’ CCTV tower . We’re more interested in China World Tower 3, the newest addition to Beijing’s first high-end office complex scheduled for completion this year. The first buildings were completed way back in 1990.

It’s meant to overtake faded Jinguang as Beijing’s tallest building at 380m high with an auspicious 68 floors. Typical of Robert Kuok’s people to keep it all low-key despite its prominence on the skyline. Hadeed & Koolhaas’ Beijing edifices may get pride of place in the glossy books but China World will be the premier office address. Why? Functional design, quality materials & maintenance.

- Excuse the dreary camera-phone pic.

Insider’s Guide to Beijing 2008

Thursday, December 6th, 2007

Finally got my hands on the Insider’s Guide to Beijing 2008. Found it in, of all places, the good ole friendly Friendship Store on Changan Jie. Strangely, Jenny Lous isn’t stocking it yet.

Lihong’s insights have been quoted in every edition since the guide was first published 3 years ago. This edition includes our thoughts on rents in the Olympic year. Thanks Adam & John for putting our name up in lights.

It’s by far the best contemporary Beijing guide. Lonely Planet doesn’t come close to what this reference achieves. Packed with entertaining yet useful information, what always impresses me is how in-depth the articles are. Also, little or none of the content is re-hashed from last year’s edition. Get one even if you’re only considering moving to Beijing.