Beijing's Grade A office rental growth to slow to 5%

Beijing's rental growth for Grade A offices is expected to slow to about 5 percent in 2013, as high rents have decreased tenants' affordability dramatically over the last three years, real estate service provider Savills said in a report on Thursday.

Six projects — one for self-use and five for lease — are scheduled to be handed-over in 2013, injecting a total leasable space of 223,000 square meters to the market. Given that supply is only half of the average for the past five years, the citywide vacancy rate is predicted to remain below 5 percent, according to the report.

Despite limited leasable space in the market, rental growth slowed on the back of weaker demand.

Grade A office rents in Beijing increased 0.9 percent in the fourth quarter of 2012 to 317.8 yuan per sq m a month, with annual growth falling to 13.8 percent from 44.2 percent in 2011, the report said.

"A number of landlords began to offer more rental incentives to combat slowing demand and retain existing tenants, given the current sluggish economy," said Joan Wang, head of research at Savills Beijing.