International Realty Times reports that rents for office space in the prime area of Beijing will rise above the same prices in Shanghai for the first time ever in 2013, making it the most expensive office location in China.

Despite Beijing's status as the capital of China, Shanghai has had the more expensive office rent for the past few decades running, simply because Beijing had more land and thus more availability. But Beijing's growth has caught up with the land available in the region.

"Beijing will add only 988,348 square meters of new office supply between now and 2014, which is equivalent to 19 percent of current total stock, most of which is concentrated in the CBD," said international property consultant DTZ, in a newly released research report into the rental market for prime office buildings in 11 Chinese cities.

"We also expect Beijing prime rent will surpass Shanghai's equivalent by 2013," the report added.

Factoring in that some of the new space in the works will be for government usage means office supply in Beijing will be even tighter. On the demand side, although foreign entry into the market has slowed due to economic uncertainty it is still rising higher than any other Chinese city.

With limited supply and stable demand, DTZ expects Beijing prime office rents to increase 29 per cent this year and grow at a slower but steady 13 per cent a year over the next five years.

The Shanghai office market, dominated by demand from financial institutions and multinational corporations that are more vulnerable to external uncertainties, witnessed much lower net absorption in the first half than Beijing, at 143,248 square meters. The city's office supply is expected to grow by more than all other locations between the second half of this year and 2014.

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