(Yicai) April 11 -- Beijing’s office rental market picked up in the first quarter as more companies sought out new spaces to rent as prices, particularly that of prime office spaces, drop, according to a recent study by US commercial property consultancy firm CBRE Group.

Fewer mass cancellations of office leases took place in Beijing in the first quarter, said Sun Zutian, head of research for CBRE’s North China region. And the net new area rented out doubled from the previous quarter to 73,000 square meters. 

Two zones where high-tech firms are concentrated, including Zhongguancun, and three emerging business districts, including Tongzhou, each had more than 10,000 sqm net rented out over the period, Sun said.

This is largely connected with landlords lowering their rents, according to the report released on April 9. The cost to lease prime office space in Beijing slumped 2 percent in the first quarter from the previous quarter to around CNY283.30 (USD39) per square meter.

In particular, rents for Grade A offices dropped more than that of Grade B offices and downtown areas, such as Wangfujing, Wangjing, Yansha and the Central Business District, logged the biggest declines.

This prompted many firms to seek better office locations and facilities, and more than three quarters of newly leased space were taken by companies upgrading to nicer offices.

"Since March, there has been a big jump in the number of corporate clients asking to view offices, especially small and medium-sized firms,” said Yuan Hui, head of the office rental department at CBRE North China.

Financial companies had the biggest leasing demand, accounting for 31 percent of newly rented spaces. Telecommunications, media and technology firms ranked second with 21 percent. Most of them were software, cloud computing and Big Data companies looking for spaces smaller than 2,000 sqm.

However, overall, the vacancy rate for premium office space in the capital city widened 0.3 percentage points in the three months ended March 31 from the previous quarter to 22 percent, due to the fine-tuning of base statistical data, Sun said. On the whole, though, Beijing’s office rentals are relatively stable.

But in order to attract more tenants, Beijing office rents will need to fall further, Yuan said. And this will spur firms to seek out better office spaces. The government roll-out of more supportive economic measures will also boost business confidence and drive demand for long-term office rentals.

Editors: Tang Shihua, Kim Taylor