The higher floors of China World Trade Center Tower 3 in Beijing now costs up to ¥1,600/m2/month compared to just ¥200 to ¥300/m2/month for Tower 1 and Tower 2 several years ago, according to Li Wenjie, Northern China president of Centaline Group, a Chinese real estate service provider.

Office building rentals in Beijing have grown 29.6% year on year during the first three quarters of 2011, said Jones Lang LaSalle (NYSE: JLL).

Investment in China's commercial real estate sector keeps running high despite bubble-bursting speculations.

China's rapid economic expansion has fueled strong demand for office space in Beijing, Jones Lang LaSalle noted in its latest report on the nation's commercial real estate market. Cash-rich state-owned companies and private businesses were also behind the ballooning rents.

During the first three quarters, 790,000m2 of office space were taken, with financial institutions, consultancies, law firms and hi-tech companies supercharging the demand for space in the central business district and East Changan Avenue, according to the Jones Lang LaSalle report.

The vacancy rate of Grade A office buildings in the Chinese capital dropped 0.1 percentage points to 8.2% despite a supply of 200,000m2 during the third quarter. The vacancy rate in the central business district and Zhongguancun, known as China's Silicon Valley, shed 2.3 and 2.8 percentage points respectively from July through September, by the end of which Grade A office space rentals averaged up 10.5% to ¥269/m2/month from a quarter earlier.

The rate of return on Beijing's office buildings currently stands at 7%, well above the 2% for upscale residential properties, according to Li Wenjie of Centaline.

Supply of Grade A office space in the city is projected to total 670,000m2 and demand to reach 870,000m2 for the whole of 2011, pushing up gains in rents to over 40% while dragging down the vacancy rate to below the 8% mark, Li predicted.

$1 = ¥6.37

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