Pollution, rent are office market concerns

Air quality is the second biggest concern for companies renting offices in Beijing, although the capital remains their primary location for regional or national headquarters, research showed on Wednesday.

About 66 percent of respondents identified air pollution as a key disadvantage for Beijing as an office location, second only to rising rents, according to international real estate service provider CBRE.

Sixty-eight percent of the respondents believed that "air pollution threatens employees' health and work efficiency". In addition, 60 percent said that "air pollution has made senior expatriates less willing to work in Beijing". A further 29 percent said that air pollution has "a significant impact".

"I chose to change my job partly because the current company I work for is located in a Grade A office building with a strong fresh air system," said Huang Yan, a 29-year-old company executive.

Concern over poor air quality in Beijing has increased significantly in recent years, while leasing activity and occupancy have both declined, leading to speculation on whether there was a connection.

However, CBRE's research findings show that demand for office space in Beijing remains strong. There is no evidence suggesting any direct link between declining leasing activities and poor air quality, experts from CBRE said.

"While poor air quality is a major concern, Beijing remains the preferred location when companies choose their regional or national headquarters," said Tin Sun, associate director of CBRE Research Northern China.

Leasing activity in Beijing has been subdued in recent years because of a short supply of offices and increasing rents.

Vacancy has remained low since 2011, standing at 4.4 percent as of the fourth quarter of 2014, the lowest among the 17 key domestic office markets that CBRE monitored. New supply has been limited over the past two years and could not satisfy market demand, leading to constant rent increases.

Office rents for Beijing Financial Street and Beijing CBD, for instance, ranked third and fourth in the CBRE's latest ranking of the most expensive global office locations. Rents inmost other sub-markets in Beijing have also reached their highest levels since the end of 2012.

Respondents cited "rising rents in Beijing" as the biggest concern when making decisions for office locations. Therefore, a majority of companies chose to adopt a more cautious leasing strategy due to the current economic uncertainties and budget constraints.

"These factors affect the overall office leasing activity, much more than the poor air quality in Beijing," said Sun.