Internet layoffs VS liquidity opportunities office market is “worry” is “happy”?
Beijing, March 31, 2022 — Colliers International, the world’s leading diversified professional services and investment management company, held the “Technology For a ‘Carbon’ Future – Colliers North China First Quarter Press conference” at China Overseas Real Estate Plaza in Beijing.Under the background of “technology + dual carbon”, Foster+Partners, a well-known institution, was invited to share the theme of “Smart low-carbon city of the future” online.At the same time, it reviews the performance of each business segment of commercial real estate in North China in the first quarter of 2022, and makes an outlook for the second quarter.By the end of the first quarter of 2022, the market net absorption was about 102,000 square meters, which has basically returned to the level of 2019.Only one new project in Lufthansa market came on the market this quarter, bringing 65,000 SQM of new supply.The overall market declined slightly, with the vacancy rate edging down 0.1 percentage points month-on-month to 14.9%.Rent continued the trend of bottom shock, up 0.4% to 342 yuan per square meter per month, after the third quarter of last year to achieve positive growth, rent stabilization and recovery trend is strengthening.In terms of sub-markets, CBD and Lize were active, with net absorption of 48,000 and 47,000 square meters respectively in the quarter.Li Juan, senior director of Strategic Customer Service Department of Colliers International North China, said, “With the completion of metro Line 14, the biggest problem in lize’s market development has been solved and its market competitiveness has been further improved.Lize will remain one of the hottest sub-markets this year due to its very competitive rental value ratio.”CBD benefited from the strong expansion of financial groups and related enterprises in the region, the vacancy rate has dropped to 9.8%.The market is moving from a tenant market to an owner’s market.The new projects in China Service Land have been entering the market on a large scale since 2019. After three years, the average vacancy rate of the projects has been lower than 20%.In terms of rent, this quarter CBD nearly 40 grade A office buildings, nearly half of the buildings have varying degrees of rent increases, only 3 buildings have a small decrease, the sub-market average rent rose 1.5% month-on-month to 361 yuan per square meter.The CBD has seen two consecutive quarters of rent increases of more than 1%, the last time it saw two consecutive quarters of rent increases was back in 2017.Starting from the second quarter of 2021, Colliers international has indicated that the rebound in overall market demand is not sustainable, that net absorption will gradually return to normal, and that rents will recover by the end of 2021 or the first quarter of this year.So far, the data for the first quarter of 2022 have confirmed the previous judgment, while the market environment has also changed in recent months.”First, the four-year period of high supply is over.From 2018 to 2021, the market added nearly 800,000 square meters of new supply annually, and this year’s supply will be significantly reduced.The market supply/demand ratio has fallen sharply from its peak in 2020 and will remain low in the future.Secondly, the demand of nearly 1.2 million square meters in 2021 is destined to become a milestone event in Beijing office market.Market participants need to avoid habitual thinking, calmly judge the new changes in 2022, and actively respond to the market trend in the new era.Finally, the de-winding cycle has begun and will last at least 3-4 years, with demand side strength determining the market’s future direction.The emergence of the epidemic has to some extent advanced the start time of the decontamination cycle.Chen Nan, Deputy managing Director of Colliers International North China, said, “Starting from 2021, the market has entered a degenerating cycle, and the subsequent trend depends on the strength of the demand side. The environment may be more favorable to owners and the time window for corporate tenants to hunt for the bottom will be shorter and shorter.”Supply-demand ratio of Beijing Grade A Office market, 2002-2024F This quarter, the biggest changes in Beijing office market come from the industrial park market, these changes are mainly concentrated in the industry demand side.According to the market data, the industrial park market is basically in a stable state in the first quarter, with the overall vacancy rate remaining at 14.6% and the rent stable at 130 yuan per square meter per month.The abrupt stop of the expansion of Internet companies in the head has not led to the realization of the market.Grade A office market benefited from financial enterprises in the quarter to achieve the historical average level of reduction.The industrial park market has benefited from the expansion of Internet enterprises for a long time. Once the industry adjustment of Internet technology enterprises occurs, the demand growth of the industrial park market will be greatly affected.In terms of leasing transactions in this quarter, the financial sector accounted for 37%, while the share of Internet technology dropped sharply to around 22%.Compared with more than 50% of transactions in previous quarters, the expansion rate of the Internet industry slowed down significantly in this quarter, mainly due to the government’s increasing regulatory policies on the Internet industry.Yan Quhai, Managing Director of Colliers North China, said, “The policy environment of the Internet industry has changed fundamentally. The long-term ‘free-range’ policy environment for the Internet has shifted to targeted compliance regulation based on the principles of anti-monopoly, anti-unfair competition and prevention of disorderly expansion of capital.2021 is not only the year of comprehensively deepening Internet regulation, but also means that the Internet industry begins to bid farewell to brutal growth and enter a new stage of intensive and intensive technological innovation and development.”In light of the new market environment, Colliers International believes that market participants need to focus on the following three important trends: First, a deep understanding of the original intention of the policy can ensure steady and sustainable development.Although the Internet regulatory policies have been increasing recently, and mainly focus on the head platform economy enterprises, the industry will usher in a more stable and healthy development stage in the future as the policies set the red and green lights for development.Second, the hegemony of one family is past, but the future is full of flowers.The development of China’s digital economy requires the Internet industry to constantly breed new enterprises of the era. From the meta-universe to the East and The West, greater development space will create more market opportunities for enterprises.The second and third echelon of Internet software and service enterprises, and the Internet hardware and equipment enterprises represented by chips and integrated circuits will benefit more.Third, the Internet industry may see large-scale area adjustment in the future.On the one hand, the speed of internal adjustment of Internet enterprises is very fast. The recent adjustment of business, personnel and organizational structure will bring about changes in office leasing space.On the other hand, last year, the leasing area of the head factory was nearly one million square meters, and this year there is a potential demand for office space integration.”The office demand side, represented by the Internet technology industry, is undergoing profound changes, which will largely affect the demand level of the overall office market in 2022,” said Yan Quhai, Managing director of Colliers North China.In addition, with the official issuance of the 14th Five-year Digital economy Development Plan by The State Council in early 2022, the unbalanced, inadequate and non-standard development of the industry is expected to be gradually solved in the future. Digital economy enterprises represented by Internet technology will still be the main demand source of the office building market in the next five years.”