A 40-block neighborhood west of the Forbidden City in Beijing is the third most expensive place to rent office space in the world, according to recently crunched numbers by Jones Lang LaSalle, a financial services company that focuses on real estate. After London and Hong Kong, the first and second most expensive places to rent, leases along Beijing’s Jinrong, or “Finance,” street cost an average of $137 per square foot a year.
It’s curious that the somewhat out-of-the-way financial district built in the 1990s should have rents even higher than New York’s Manhattan, which ranked seventh on the list at $104 per square foot. Despite the fact that some officials like to call Finance Street the “Wall Street of China,” Beijing isn’t traditionally seen as a core part of the country’s financial sector. (China’s two stock exchanges are in Shanghai and Shenzhen.) The mixed-use neighborhood of serviced apartments, offices, luxury hotels, and a park fashioned after New York’s Central Park is intended to be an example of ideal urban living, yet isn’t even easily accessible by public transportation.
So why the surging prices? Beijing is running out of office space as more firms try to position themselves in the economic and political decision-making center of the country. Office vacancy in Beijing is at a low of 4.4%, and it’s 2% along Finance Street, which is home to institutions like the People’s Bank of China, China’s Central Bank, and China’s Securities Regulatory Commission, part of China’s State Council. Now, the city is investing in another financial district in Lize, in southwestern Beijing.
Perhaps more importantly, Chinese financial institutions are buying up office space in the capital, encouraged by the fact that commercial property prices have risen year after year. Rents for high-grade office rentals nearly doubled between 2008 and 2012, while Shanghai’s grew less than 10% over the same period. China Taiping, Ping An, China Merchant Banks, Bank of China, and Bank of Communications have been among the largest buyers (pdf) of office units in Beijing over the past few years. In June, China Merchants Bank signed a deal to spend 3.9 billion renminbi ($640 million) to build a 614,000-square-feet development on Finance Street.