Premium office rents in China’s first-tier cities have softened but remain high, while rents in second-tier cities are under pressure, according to a report by Cushman & Wakefield (C&W). Rents for grade A office buildings in Beijing, a barometer of China’s commercial property market, retreated by 1.5% quarter-on-quarter in the second quarter to CNY514 per usable square meter, according to the report. Rents for such space in Beijing have been easing since last year. Nationwide, Beijing’s grade A offices are still the most expensive, followed by those in Shanghai, which in the second quarter stood at CNY405 per usable sq m. Zhang Ping, Director of Cushman & Wakefield’s Beijing research operations, said the decline in Beijing office rents reflects the broader economic slowdown and sluggish demand from multinationals, which are the major tenants of China’s premium offices. Beijing has already bid farewell to the time when premium offices were in severe short supply and rents skyrocketed. Zhang said that in 2011, office rents in Beijing grew at an annual rate of 73%. The capital’s average rent level ranked fifth globally that year, exceeding Manhattan’s, but almost stopped rising in 2012, with annual growth of just 3.2%, and the city’s rent level dropped to the seventh worldwide. The report said office supply in first-tier cities remains tight, as no sufficient premium office is expected to be available for companies in the next few years. Average vacancy rates in first-tier cities, namely Beijing, Shanghai, Guangzhou and Shenzhen, stood at 5% to 7%, while the average vacancy in 20 Chinese major cities monitored by C&W stood at 11%. C&W said total inventory of China’s grade A offices stood at nearly 34 million sq m at mid-2013. It estimated in the next three years, 58 million sq m of new offices will become available, of which about 19 million sq m will be in first-tier cities. While markets in first-tier cities face short supplies, second-tier cities’ office buildings are abundant, if not oversupplied, as developers have been flocking to these cities for potential growth. “Pressure is especially high in Qingdao, Chongqing and Chengdu, where vacancies are well above 30%,” Zhang said.