Investments in Beijing office market still strong despite COVID-19

Despite COVID-19 challenges, investment activity in Beijing's office market holds strong, according to the recently released JLL Beijing's Second Quarter Property Market Review.

Investors continued to be active in the quarter, bringing the investment total for the first half of the year to more than 27 billion yuan ($3.86 billion), according to the report.

Although recording a lower level than a year ago, the investment volume in the first quarter was still relatively high and included a few high-profile deals, said the report. Among them was Baring Private Equity Asia's foray into the Beijing market in April, when the investment firm purchased Arca Building in Zhongguancun Software Park from the Singaporean Mapletree Group for 750 million yuan. Meanwhile, Zhonghong Building – an unfinished commercial tower in Chaoyang District – was sold through an online auction to China Orient Asset for 3.3 billion yuan, the report said.

While the recent resurgence of COVID-19 cases in Beijing will further weigh on the market, it can also be expected that this difficult period will give way to further opportunities in the market, according to the report.

The report explained that as fallout from the virus results in delays, buyers may find new opportunities among sellers with a preference in completing transactions sooner rather than later, considering more competitive prices than previously. Despite the uncertainty in the market, there remains sufficient interest in the market from investors, who continue to hold confidence in the long-term outlook, as underlined by the strong sales volume in the first quarter.

"We see that investors continue to be highly interested in core areas, particularly when it comes to assets with real upgrade and growth potential; other deals transacted in the quarter included the emerging and suburban areas, demonstrating investors' growing confidence in decentralized areas," said Michael Wang, head of capital markets for North China at JLL in Beijing.

"While the fallout from COVID-19 is presenting a challenging time in the market, forward-looking investors continue to focus on the longer-term outlook as they pursue opportunities in Beijing," Wang said.

According to The Global Real Estate Transparency Index report produced jointly by Jones Lang LaSalle Inc and LaSalle Investment Management Inc, Shanghai and Beijing have become the major destinations for cross-border real estate investment, with institutional money helping to improve transparency, increase professionalism and expand access to market data. The real estate industry in major cities in the Chinese mainland is also categorized into the "transparent" tier, among the top global improvers, based on the quantification of 210 elements of transparency.