Office and retail markets saw improved leasing demand; Investment activity in core areas regained momentum

Shanghai, January 14, 2026 – In 4Q25, Shanghai’s Grade A office market saw cost-driven relocation and upgrade demand continuing, with certain sectors seeing expansionary demand. According to Neo Huang, Head of Office Leasing Advisory for Shanghai and Head of Retail for East China, JLL, “As market remains tenant-favourable, tenants are now actively seeking for more favourable leasing terms and upgrade opportunities, with certain sectors recording large-scale transactions at year-end.”

Leasing activity in the retail market remained steady, with expansion in sectors such as consumer electronics, home appliances, sportswear, collectible toys, pet-related services, and affordable dining driving a continued increase in net take-up during the quarter. In the logistics market, many tenants were optimizing space in the current tenant-favourable market. Shanghai's investment market saw momentum reviving in core areas, while share of investment demand experienced increase from last year. Shanghai’s hotel market continued to gain positive momentum, driven by reviving international tourism demand.

In 4Q25, Shanghai office market liquidity experienced a modest recovery. Total net absorption recorded 161,000 sqm in 4Q25, totalling 499,000 sqm for the entire year. Net absorption reached 53,000 sqm in the CBD and 108,000 sqm in the decentralised market in 4Q25. Upgrade demand continued amid narrowing rental disparity between Grade A and Grade B projects.

“Over the past 12 months, the financial sector remained the top driver, accounting for 23% of Grade A office demand. Growth in private funds’ businesses, particularly quantitative and other securities investment funds’, fuelled related leasing activity. Meanwhile, demand share of the tech sector raised to 17%. Large-scale transactions were recorded during the year,” said Stanley Jiang, Senior Director of Office Leasing Advisory for JLL Shanghai. Additionally, demand from professional services – led by domestic law firms – remained resilient, representing 14% of demand. Shifting consumer behaviour also drove expansionary demand from outdoor sports and art toy retailers.

Four new projects totalling 315,000 sqm entered the market in 4Q25, recording the total GFA of 1,037,000 sqm for the entire year. In the CBD, two projects delivered 243,000 sqm in 4Q25, pushing vacancy up 1.7 ppts q-o-q and 1.6 ppts y-o-y to 18.0%. In the decentralised market, two projects totalling 72,000 sqm reached completion in 4Q25, adding to an annual total completion of 708,000 sqm.

As the overall market remained tenant-favourable, rents stayed in downward cycle. In the CBD, rents decreased by 2.8% q-o-q and 12.1% y-o-y to RMB 6.4 per sqm per day. Most landlords remained flexible in negotiating lease terms. Some projects that successfully maintained high occupancy adopted more stable strategies. In the decentralised market, rents decreased by 2.7% q-o-q and 11.0% y-o-y to RMB 4.2 per sqm per day. High vacancy rates continued to weigh on landlords’ rental expectations and led them to offer substantial incentives.

In 2025, Shanghai’s business park market recorded net absorption of 396,000 sqm. Facing continued new supply, tenants were actively seeking to balance between upgrade opportunities with cost-saving measures. As some emerging submarkets matured industrially and commercially, they began attracting high-quality tenants. According to Stephen Yu, Head of Business Park Services for JLL Shanghai Office Leasing Advisory, “Technology and internet industries were the key drivers of demand, particularly in the AI, integrated circuits, and gaming sectors. Additionally, demand from headquarters-based corporations and research institutions remained relatively active. In terms of property types, flagship projects with comprehensive advantages, as well as standalone buildings or independent campuses, are gaining favour.”

Three new projects were completed this quarter, adding a total GFA of 618,000 sqm. Overall market rents continued to face downward pressure due to cautious tenant sentiment and the large influx of new supply. As a result, overall rents declined by 2.2% q-o-q and 13.4% y-o-y to RMB 3.4 per sqm per day.

Evolving consumer preferences and stimulus policies created opportunities for specific sectors. In 2025, new leases were predominantly driven by industries such as consumer electronics and home appliances, sportswear, collectible toys, pets, and affordable dining. According to Neo Huang, “Retail leasing activities remained steady in 4Q25, supported by solid pre-leasing deals in new projects and incentive for tenants in existing ones.” Net take-up in Shanghai's urban area reached 273,000 sqm in 4Q25, bringing the full-year total to 404,200 sqm.

In 4Q25, two prime projects and one decentralised project collectively contributed 265,000 sqm of GFA to Shanghai’s retail market. For the full year of 2025, two prime projects and three decentralised projects delivered a total of 476,500 sqm of retail GFA. Rental concessions and more flexible lease terms aided landlords in backfilling vacancies. Prime vacancy rate declined by 0.4 ppts to 8.4% in 4Q25, while decentralised vacancy rate declined by 0.2 ppts q-o-q to 13.3%.

In 4Q25, average ground floor rents in prime area dropped 0.4% q-o-q to RMB 41.8 per sqm per day. Decentralised area decreased 1.3% q-o-q to RMB 14.4 per sqm per day.

Leasing demand stayed stable in 4Q25 as cost-conscious tenants continued to optimize space in a tenant-favourable market, driving net absorption of 263,500 sqm for the quarter and 533,600 sqm for 2025. 3PL providers remained the primary demand drivers in 4Q25, consolidating space to enhance operational efficiency. Vacancy rate, as a result, decreased 2.0 percentage points to 27.8% by year-end 2025.

Shanghai's annual supply reached 1.02 million sqm after a Jiading project finished in 4Q25, marking the second straight year exceeding 1.0 million sqm. While vacancy slightly decreased in 4Q25, overall figure remained close to 30%, exerting downward pressure on the market. In 2025, new supply was distributed across seven Shanghai submarkets tracked, with Fengxian, Lingang, Jinshan, Qingpu, and Songjiang each delivering over 150,000 sqm, pushing up vacancy levels in their respective submarkets.

Overall rents decreased by 6.5% q-o-q on a like-for-like basis to RMB 1.12 per sqm per day. Hong Yin, Head of Logistics & Industrial for JLL China remarked, “In some areas, persistent high vacancy rates have prompted landlords to maintain relatively aggressive pricing strategies, and rents continued to trend downwards.”

In 2025, Shanghai’s investment market showed a modest retreat, recording a total of 89 en-bloctransactions with a combined transaction volume of RMB 48.7 billion — a 15% y-o-y decrease. In terms of deal size, the average deal volume reached RMB 550 million for 2025, experiencing a modest drop compared to the 2024 average of RMB 560 million. This year recorded 15 deals exceeding RMB 1 billion, with transactions under RMB 500 million accounting for 63% of total deal volume by count.

In 2025, offices remained the most transacted asset class in Shanghai’s investment market, capturing 52% of total transaction volume and 42% of deal count — solidifying the market's fundamentals. Other asset classes by transaction volume included rental housing (15%), retail (13%), hotel (8%), business park (6%), and data centers (5%). In 2025, several landmark office asset deals were successfully closed, bolstering the outlook for office investment. Itreflects strong investor interest for high-quality assets in core locations with stable returns and may partially alleviate concerns related to land tenure.

By investment purpose, investment demand accounted for 82% of transactions, marking a further rise from 2024. This is accompanied by non-local SOE and private entrepreneurs continuing their expansions in Shanghai, reflecting investors' sustained confidence in the long-term appreciation of Shanghai's real estate assets. By geographic location, transactions within the Inner Ring accounted for 42% of transaction volume and 41% of deal count, with a steady return of investment interest to core areas.

Ling Sun, Head of JLL Capital Markets East China stated, “Looking ahead, as the REITs pilot program continues to expand, urban renewal policies are further implemented, and investment exit channels become increasingly mature, more high-quality assets are expected to come to market.”

Supported by steady domestic and international tourism demand, Shanghai's hotel market continued to show positive momentum. From January to November 2025, the city welcomed 8.3 million international visitors, up 38.8% y-o-y and surpassing the 8.2 million recorded in the same period in 2019. During the same period, five-star hotels saw a 2.7-percentage-point y-o-y increase in occupancy, a 1.2% y-o-y rise in average daily rate (ADR), and a solid 5.2% y-o-y growth in revenue per available room (RevPAR). According to the latest data, Shanghai welcomed 6.8 million visitors during the 2026 New Year holiday, generating RMB 12.3 billion in total tourism revenue and achieving an average hotel occupancy rate of 70%.

In 2025, Shanghai saw 3,838 new upscale and luxury hotel rooms reaching the market. Of these, 1,145 rooms (30% of the total) were in the Hongqiao area, including key additions such as the Traders and Shangri-La Hotel (611 rooms). The Qiantan and Houtan areas contributed 783 new rooms (20% of the total), highlighted by the Waldorf Astoria (204 rooms).

“Shanghai’s tourism market has fully rebounded, with international visitor arrivals exceeding pre-pandemic levels and driving steady growth in hotel performance. However, concentrated new supply in certain areas may intensify competition, putting short-term pressure on hotel performance in specific submarkets,” said Tao Zhou, Managing Director, Head of JLL Hotels & Hospitality Group Greater China.