Foreign corporations are giving up the glamour of Beijing's CBD for cheaper rents on Financial Street and in Wangjing. Corporate real estate will get cheaper - because there'll be more of it, says market veteran Alice Wood

If sales offices are indication of a real estate seller's success then DTZ is doing well in the Chinese mainland. The British-Hong Kong firm just opened two offices here, in Wuhan and Chongqing. That makes 11. The largest by head count and turnover is Shanghai, followed by Shenzhen and then Beijing. Looking after the space needs of foreign corporations is what Alice Wood does in the capital. Glancing at her business card you wouldn't think the realtor comes from a distinguished Shanghai business family. “My father had a Jewish business partner who couldn't pronounce the Chinese for wood and so he gave him the English equivalent.” The name stuck, even when the family moved to Hong Kong.

From her office on Beijing's prime artery, Chang'an Avenue, Wood observes a glassy new high rise replacing Beijing's low-rise redbrick homes and workshops. New towers offer potential fodder for her space-seeking corporate clients. “So many skyscrapers are going up. There are a lot of developments coming along.” Warnings of a shortage of usable downtown land are exaggerations. “If you look to the south of Chang'an Avenue there's plenty of sites that will be developing soon.”

The enormous supply of new properties coming online will, Woods reckons, drive rent prices down in the short term - that's if the buildings make it to the market. “There has always been a problem with Beijing in that the enormous supply set to come on board sometimes doesn't come. Developers slow down. They may see the market as not being ready, they may be having problems with funds.”

One place that's not slowing down is Financial Street, the great Western hope of city planners. West of Tiananmen Square, rows of glassy new high rises have already drawn UBS, Morgan Stanley and the Royal Bank of Canada. “Normally the Financial Street has housed local enterprises but it has changed lately in the way that they are giving more incentives and the incentives are really for firms that are newly set up in China. That's why all the financial institutions are locating there.”

Others are relocating slabs rather than all of their operations to Financial Street, where they'll also be near government ministries and the central bank headquarters. “Companies going to Financial Street need to be there.” That's saying something, considering the infamous traffic jams executive brave on Chang'an Avenue, past Wangfujing and Xidan on the westward drive to the Financial Street. It's worth their while, says Wood. “There are incentives that they want, like rent rebates and policies that allow them to operate there.”

So it's not a matter of traffic. But the commute could be about to end for expatriates. Wood has been watching developers sniffing out sites for serviced apartments along the Financial Street, perfect for foreign executives still living in the plentiful supply of villas and apartments on the north and north east side of Beijing. The nearest apartments currently are four kilometers up the road, in the marble blandness of the enormous Oriental Plaza commercial center.

The rise of Wangjing and the Financial Street is part of a tidal wave of change in China's corporate real estate markets. Companies are changing their way of choosing where they want to be. “Before people were just coming to the CBD if they want to be convenient and have a good image and be located close to customers and suppliers. Lately we've seen that companies are beginning to see rents in the CBD as too high. If they're not in the financial sector, if they're not requiring the high image or needing to be close to their customers in the CBD or ministries, they will relocate elsewhere.”

Getting around the capital will get easier, given that Beijing's subway system will sprout nine new lines by 2008. That will be a relief especially for IT executives and software engineers braving the northern limits of the city each day to work in Zhonguancun, China's Silicon Valley. “Companies going there mainly want to enjoy the favorable policies of the Zhonguancun Science Park, so they need to be there.”

Beijing's nasty traffic snarls don't bother some, even if the CEO's sedan is stuck behind a cement truck at Wangfujing. “It depends on the company. Some say ‘I don't really care as long as there are bus lines running near to the office. As long as my employees can get there I don't care where I am as long as the rent is right.' And others tell us ‘no, transport for employees is very important to us. Car transport is very important to us we need to be able to get in and out very easily, and we need to be on subway lines.'”

But a new kid on the block, Wangjing, seems to have filled up before competing zones even noticed it had arrived on the scene - and with even less infrastructure than that supporting Zhonguancun. “A lot of companies have moved their headquarters to Wangjing,” nods Wood. Wangjing's rise is more proof that price matters more than ever in Beijing's real estate market - rents of US $11 per square meter outdoes anything other districts offer - rates approach US $30 per square meter in the CBD.

Companies locating to Wangjing have had to lay on buses and lunches to shuttle staff and keep them fed. “To locate there you have to put up with the infrastructure there which is really not so developed yet. So all the big companies going there are setting up big campuses and can afford to do their own infrastructure such as transport and employee lunches, everything.” Today Wangjing is full: “there's no more supply for new companies that want to go in and set up their own campus.”

New zones like Wangjing will become more of a rarity as regulators get tough on developers wasting land while Beijing dolls itself up for the 2008 Olympics. A government clean up of Beijing's white elephants in the run-up to the Games has been a boon for DTZ - the company was appointed as sales agent for a famous multi-story eyesore which stood abandoned and unfinished for a decade. White elephants exist because of problems with ownership and documentation - and the Chinese corporate style. “Local enterprises often do various types of business and one of the side businesses may be building a skyscraper. And if there's some problems with the other business the whole project may be put on hold.”

Yet rumors of a government command forbidding new construction projects in 2007 are exaggerated, says Wood. “What we understand is that there's been no official document to come out so far. They've really controlled through administrative policies where they issue permits to start construction. Thus those who got permits a long time ago should be finished by now and if you got a permit a long time ago and still haven't started they can take away your permit.”

Alice Wood has the right mix of British-sounding surname and Asian commercial heritage for a company with its roots in England's genteel property companies and its future focused on Asia. DTZ became DTZ Debenham Tie Leung in 1999 after the British firm hooked up with CY Leung & Co and Edmund Tie and Co. The two Hong Kong-based property brokers provided the company chairman, as well as the expertise to guide the firm into the Chinese mainland. Judging by the speed of the firm's expansion here, things are going to plan.