Shanghai, October 14, 2025 – In 3Q25, office sector saw cost-driven relocation and upgrade demand continue as market rents declined. 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.”

In the retail property market, stimulus policies and evolving consumer preferences supported leasing demand from sportswear, collectible toys, consumer electronics and home appliances. In the logistics market, cost remained as the main driver of tenant decision-making, while new projects with proximity to consumers are increasingly attracting tenant interest. Shanghai’s investment market showed signs of recovery, with investors showing increased appetite for assets in core areas. Shanghai’s hotel market performance improved on the back of increased policy support and reviving inbound tourism demand.

In 3Q25, Shanghai total net absorption recorded 190,400 sqm. Market demand stays cost-conscious, while select industries saw expansionary demand. “Financial services remained resilient, with private equity firms showing an increasing presence in the market. Additionally, AI-related companies and retail brands focused on outdoor sports, continued to demonstrate strong leasing demand,” said Joseph Wang, Head of Tenant Representation of Office Leasing Advisory for JLL Shanghai. In 3Q25, CBD and decentralised market net absorption recorded 53,700 sqm and 136,700 sqm respectively. With the rental disparity between Grade A and Grade B properties continued to narrow, cost-driven upgrade has become increasingly common among tenants from different industries. Third Party Office Operators were relatively active in both CBD and DBD markets.

Two new projects entered the decentralised market, delivering 127,800 sqm. In the CBD market, vacancy rate decreased by 0.6 ppts q-o-q to 16.3% benefiting from cost-driven upgrade and lack of new supply. Landlords of projects with higher vacancy rates remained negotiable. Decentralised market vacancy rate decreased by 0.5 ppts q-o-q to 30.5% this quarter as relocation and upgrade demand trend from business parks and suburban areas continued, though pre-leasing activities in new completions were scarce.

Tenant-favourable market continued as rents remained on a downward slope in 3Q25. Average rent in the CBD market recorded 6.6 RMB/sqm/day. To maintain occupancy rates, landlords remained flexible in lease term negotiations and were willing to discuss lease restructures conditional on extended leasing terms. In the decentralised market, rents reached level of 4.3 RMB/sqm/day. The high vacancy rate affected landlords' rental expectations, leading them to offer substantial incentives and competitive rents to attract tenants.

In 3Q25, the Shanghai business park market’s net absorption recorded 41,200 sqm. Facing the continuous new supply, tenants were actively seeking for upgrade opportunities while remained highly cost sensitive. 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 active.”

Two new projects were completed this quarter, adding a total GFA of 204,700 sqm. The new supply pushed the overall vacancy rate up by 0.9 ppts q-o-q to 26.1%. 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 fell by 4.4% q-o-q to RMB 3.5 per sqm per day.

During the third quarter of 2025, sportswear, collectible toys, pet services, and consumer electronics remained active amid evolving consumer trends. According to Neo Huang, “Trade-in incentives and rapid technological advancements have bolstered leasing momentum for consumer electronics and home appliances.” Despite no new completions, the Shanghai urban area still recorded net absorption of 105,490 sqm in 3Q25.

In 3Q25, vacancy rates fell by 0.8 ppts q-o-q to 8.8% in prime areas, driven by brands’ increasing interest of opening flagship stores to showcase brand culture and deliver unique experiences. Meanwhile, the decentralised vacancy rate fell by 0.6 ppts q-o-q to 13.5% in 3Q25. The resurgence in inbound tourism and ‌rising‌ domestic tourism ‌drove notable growth‌ in net absorption of key tourist areas, such as East Nanjing Road, Xintiandi, and Huaihai Road submarkets.

The downward rental trend persisted in 3Q25. Landlords prioritised occupancy with rental concessions and flexible terms amid competitive pressures. Therefore, average ground floor rents in prime areas declined by 1.4% q-o-q to RMB 42.5/sqm/day and decentralised rents declined by 1.9% q-o-q to RMB14.7/sqm/day in 3Q25.

Looking ahead, China's stimulus policies on service consumption, tourism, trade-ins, and personal loan subsidies are expected to further boost consumption. We expect active leasing activities of sportswear, collectible toys, and consumer electronics sectors to continue.

In 3Q25, overall demand remained stable, with most tenant activities driven by cost-saving purpose. Net absorption totalled 119,200 sqm as one of the newly completed attracted tenant activities due to its proximity to consumer. The quarter's leasing activity was predominantly driven by 3PLs, manufacturers, and supermarket chains, with notable transactions including a major automaker securing 20,000 sqm in Jinshan and a supermarket chain anchoring a newly revitalized project.

Shanghai continued to see new supply delivery during the quarter - three projects totalling 327,000 sqm completed, bringing the year-to-date completion to 963,000 sqm. Vacancy as a result, further increased to 29.8% by the end of 3Q25. Qingpu, Lingang and Northwest all recorded the completion of a new project. The Northwest project achieved high occupancy rate thanks to its prime location, while Qingpu and Lingang faced slower leasing amid rising competition.

Overall rents decreased by 5.8% q-o-q on a like-for-like basis to RMB 1.20 per sqm per day. Hong Yin, Head of Logistics & Industrial for JLL China remarked, “Amid cost-driven demand dominance and elevated vacancy rates, landlords maintain a relatively aggressive pricing strategy and rental rates continue to face downward pressure.”

In 3Q25, Shanghai lifted HPRs beyond the outer ring for local and non-local residents who have paid social security or income tax for more than a year. The minimum mortgage rate for second-home purchases was also lowered to match that of first-home purchases. Primary home sales volume fell 25.3% q-o-q to 1.27 million sqm due to contracted new supply in 3Q25. High-end buying demand remained stable, but pre-sale performance varied across newly launched high-end projects. 3Q25 recorded 796 high-end units sold, down 2.9% q-o-q.

New home launches slowed down this quarter, leading total new home supply to drop 26.6% q-o-q to 1.23million sqm. Eight high-end projects with a total of 931 units were launched for sale in 3Q25. The average prices of these new high-end projects ranged between RMB 135,800 per sqm to RMB 205,000 per sqm.

High-end primary price rose 0.7% q-o-q to RMB 151,900 per sqm in 3Q25 amid looser price caps. Meanwhile, the average high-end secondary price remained under pressure, falling 2.9% q-o-q to RMB 129,000 per sqm amid slower sales activity and continued homebuyer caution.

“We expect the recent relaxation of HPRs beyond the outer ring to have a mild impact on home sales momentum improvement as homebuyer sentiment remains low. That said, we anticipate purchasing demand for high-end projects in core locations to remain solid,” said Sherril Sheng, Research Director for JLL China Residential Sector. High-end primary prices are expected to continue to edge up, while high-end secondary prices are likely to decline further due to subdued homebuyer expectations and continued competition from primary projects.

In the third quarter of 2025, Shanghai’s investment market showed clear signs of recovery, with 17 transactions totalling RMB 14.97 billion — up 78.1% q-o-q. The average deal size rose to RMB 881million, well above the 2024 average of RMB 560 million and H1 2025’s RMB 420 million. Four deals exceeded RMB 1 billion each, while transactions over RMB 500 million accounted for 47% of total volume in 3Q25.

In Q3 2025, the office sector regained dominance in Shanghai’s investment market, capturing 75% of total transaction volume and 53% of deal count. The quarter was marked by the city’s largest single-asset office deal in nearly two years, which boosted investor confidence and signalled a turning point for the sector’s recovery. Other categories included industrial parks (11%), retail properties (8%), and rental housing (6%).

From a demand perspective, investment-driven demand made up 91% of transactions, led by high-net-worth individuals and corporate buyers focused on long-term value. Core locations remained in favour, with 86% of total transaction volume and 81% of deals within the Middle Ring Road.

Ling Sun, Head of JLL Capital Markets East China stated, “With continued policy support, rising foreign capital interest, and more quality core assets entering the market, Shanghai’s commercial real estate investment momentum is expected to strengthen through Q4 2025.”

Supported by both domestic and international tourism demand, Shanghai's hotel market continued to show positive momentum. From January to August 2025, the city welcomed 5.5 million international visitors, up 37.1% y-o-y. During the same period, the occupancy rate of five-star hotels increased by 2.2 percentage points y-o-y. Despite a slight decline of 1.0% in average daily rate, revenue per available room (RevPAR) still achieved a solid growth of 2.3%. According to the government’s data, during the Golden Week holiday, the city received a total of 25 million visitors, representing a 19.7% y-o-y growth.

In Q3 2025, several new hotels opened, including Hotel Indigo Shanghai Dishui Lake (182 rooms), Traders Shanghai Hongqiao Airport (520 rooms) and Mumian Shanghai Expo (329 rooms). Approximately 1,300 additional rooms are expected to enter the market in Q4, led by Waldorf Astoria Qiantan (203 keys) and Thompson Expo (255 keys).

“Despite a notable rebound in both business and leisure travel in summer and Golden Week holiday, which has helped revive the industry, most hoteliers remain cautious on 2025 full-year revenue due to a slow recovery of the food and beverage segment.,” said Tao Zhou, Managing Director, Head of JLL Hotels & Hospitality Group Greater China.