Beijing’s commercial real estate market presented a study in contrasts throughout 2025, where a palpable sense of caution in leasing and investment decisions ran parallel to a groundbreaking policy shift poised to redefine the industry’s future. The period was characterized by a profound adjustment, with the leasing sector grappling with a tenant-favorable environment marked by high renewal rates and decelerating rent declines. Simultaneously, the investment sector experienced a significant cooldown in large-scale transactions, counterbalanced by a surge of interest in retail assets and the transformative opportunities presented by new public Real Estate Investment Trust (REITs) policies. This dichotomy established a market moving towards a new equilibrium, where challenges in supply-demand dynamics coexisted with emerging signs of stabilization and policy-driven momentum, fundamentally reshaping the industry’s operational logic for years to come.
A Tenant’s Market Takes Hold
Shifting Power Dynamics
Corporate tenants, driven by a heightened and disciplined focus on cost control, adopted a highly cautious and rational approach to their real estate needs in 2025, profoundly altering the market’s power structure. This sentiment gave rise to the year’s most prominent leasing trend: the clear dominance of renewal transactions. Throughout the year, companies overwhelmingly opted to renew their existing leases or, in many cases, downsize within their current buildings rather than relocate. This strategy was primarily motivated by a desire to avoid the substantial one-time capital expenditures associated with a move, which include costs for new decorations and the often-overlooked expense of restoring their former spaces to their original condition. This widespread behavior firmly established a market dynamic where tenants held significant bargaining power, forcing landlords to compete aggressively not just for new occupants but for the retention of their existing ones, a reversal of the dynamic seen in previous years.
In direct response to this tenant-centric environment, landlords across the city underwent a significant and necessary strategic reorientation, pivoting away from ambitious growth targets. The primary objective for property owners shifted decisively from pursuing rental growth to the more defensive, yet critical, goal of securing and maintaining high occupancy rates. To achieve this, building owners began actively engaging with their existing tenants well before lease expirations, offering proactive and flexible solutions designed to ensure retention. These measures frequently included comprehensive lease restructuring, offering more favorable terms, or providing direct rent reductions to remain competitive. This strategic pivot reflects a fundamental acceptance of the new market reality, where tenant satisfaction and stability have become the cornerstones of a successful asset management strategy, replacing the previous cycle’s focus on maximizing rental income at all costs in a more landlord-favorable climate.
The Numbers and a Looming Challenge
An examination of core market data from the fourth quarter of 2025 further illuminates these trends and offers signs of a nascent stabilization amid the broader adjustments. Notably, the fact that no new supply was added to the Grade A office market during the quarter allowed for the continued absorption of existing inventory. This digestion of available space contributed to a slight but welcome improvement in the overall vacancy rate, which fell by 0.3 percentage points from the previous quarter to end the year at 15.2%, excluding self-used properties. While the city’s total net absorption of 21,790 square meters represented a modest decline from the third quarter, it indicated that leasing activity, though subdued, had not stalled completely. Regional performance varied significantly, with the Central Business District and Wangjing sub-markets demonstrating relatively strong absorption, a success largely attributed to the aggressive and strategic rent-concession strategies employed by landlords in those highly competitive areas.
While rents continued their downward trajectory, the pace of the decline began to show clear signs of slowing, suggesting the market may be approaching a floor after a prolonged period of correction. In the fourth quarter of 2025, the average monthly rent for a Grade A office building stood at 210 yuan per square meter, representing a 5.6% decrease quarter-on-quarter and a more substantial 16.3% drop year-on-year. Crucially, however, the rate of this decline is moderating, with forecasts indicating the average rent decline for the full year of 2026 will narrow considerably. However, this stabilization faces a significant headwind, as a concentrated wave of 700,000 square meters of new office projects is scheduled for delivery in 2026. With an overwhelming 90% of this new supply located in the eastern sub-markets, these areas will face intensified competition, placing continued downward pressure on rents and potentially offsetting some of the market-wide stabilization that began to emerge at the end of 2025.
Investment Cools as New Policies Ignite Hope
A Contraction in Traditional Deals
Mirroring the widespread adjustments observed in the leasing sector, the Beijing commercial real estate investment market experienced a significant and pronounced slowdown in 2025. The total volume of large-scale transactions recorded for the year was approximately 18 billion yuan, a figure that marks a steep 58% decrease when compared to the activity levels of 2024. This volume is also roughly half of the average transaction volume recorded over the past five years, underscoring the depth of the market’s retrenchment. Market activity weakened even further in the fourth quarter, indicating a deepening sense of investor caution as the year drew to a close. This risk-off attitude caused a notable contraction in transaction volumes for traditional office assets, as investors weighed the uncertainties of the leasing market against their long-term return expectations, leading many to pause or redirect capital toward what they perceived as safer havens in a volatile economic climate.
Within this subdued and cautious market, a clear and distinct preference emerged for commercial retail assets, which became a primary focus for available capital. These assets demonstrated relatively strong anti-cyclical properties, proving more resilient and stable in the current economic climate compared to their office counterparts. A landmark transaction in the fourth quarter vividly underscored this trend when a major international shopping center operator announced a strategic partnership with a prominent capital firm to establish a specialized real estate fund. This fund was created to jointly hold a portfolio of three shopping centers, including the well-known Beijing Lido Mall. This deal was widely regarded as a significant signal of the market’s re-evaluation of retail asset value. In terms of investor profiles, self-use buyers and insurance institutions were the most active participants, a composition that reflects the market’s conservative mood and a strong preference for long-term, stable returns over more speculative ventures.
The REITs Game-Changer
A pivotal development in 2025 was a significant policy breakthrough with profound and long-term implications for the entire commercial real estate market. The China Securities Regulatory Commission and the National Development and Reform Commission jointly expanded the pilot scope of public Real Estate Investment Trusts. The new policy now includes ultra-Grade A and Grade A commercial office buildings in major cities, as well as four-star and above hotels, as eligible underlying assets for securitization. This landmark decision marks the official extension of the public REITs market into the commercial office and hotel sectors, creating a vital new channel for liquidity and fundamentally altering the financial landscape for asset owners and investors alike. This move is expected to unlock value trapped in illiquid assets and provide a new, publicly traded investment vehicle for those seeking exposure to prime real estate.
The immense potential of this policy is already being evidenced by successful precedents in Beijing, such as the CICC First Agricultural REIT. The underlying asset of this particular REIT, the First Agricultural Yuanzhong Center, is home to major technology tenants, adding to its appeal. Upon its debut, the REIT surged over 28% on its first day of listing, a powerful confirmation of the market’s strong recognition of and appetite for the securitization of high-quality, well-leased commercial real estate. Industry experts believe this policy expansion will be transformative for the sector’s long-term health and evolution. The growth of the Chinese public REITs market is expected to promote the commercial real estate industry to accelerate its transformation to a refined asset management model and bring liquidity premiums to projects with core locations and outstanding operational resilience, providing a crucial financial release valve for asset holders facing liquidity pressures.
The Dawn of a New Paradigm
The confluence of leasing market pressures and investment policy innovations in 2025 cemented a definitive transition for Beijing’s commercial office sector. The old model, which relied heavily on “incremental expansion” through the constant construction of new supply, gave way to a new era defined by “stock optimization,” where value creation was increasingly found in enhancing and repositioning existing assets. This fundamental shift meant that the ability to execute sophisticated and refined asset management became the single most important core competitiveness. The period revealed that for landlords, success no longer hinged on location alone but on the continuous optimization of lease strategies and investment in building quality. For investors, the year underscored the importance of discipline and foresight, demanding a focus on high-quality, operationally stable assets while actively seeking to capitalize on the new valuation and liquidity opportunities created by the expansion of the public REITs market, ultimately determining which enterprises would successfully navigate the cycle.
