Shanghai’s commercial real estate market saw improved leasing and investment activity

Shanghai, April 14, 2026 – In 1Q26, underpinned by sustained policy support and a steady recovery in economic activity, Shanghai’s commercial real estate market showed clear signs of improvement, setting a strong foundation for the year ahead. According to Neo Huang, Head of Office Leasing Advisory for Shanghai and Head of Retail for East China, JLL, “Shanghai’s Grade A office market saw demand continue to recover, with rental declines narrowing and performance diverging further across submarkets.“ Driven by strengthened supportive policies and recovering consumer confidence, retail leasing demand remained resilient across sectors such as sportswear, collectible toys, consumer electronics, and affordable dining. In the logistics sector, local tenants continued to seek upgrade opportunities amid declining rents. In the investment market, transaction for core-area assets in Shanghai remained active, with total transaction volume rising year-on-year. Shanghai’s tourism market continued to improve, driving a steady recovery in the hotel sector.

In 1Q26, Shanghai’s Grade A office market saw continued recovery in leasing demand, with total net absorption reaching 201,000 sqm. Net absorption reached 72,000 sqm in the CBD. “Financial services firms remained the primary demand driver, with some foreign-invested financial and professional services firms adopting more proactive leasing strategies,” said Neo Huang, Head of Office Leasing Advisory for Shanghai, JLL,“upgrading demand from TMT firms also stayed robust.” Net absorption in the decentralised market recorded 130,000 sqm, driven by cost-saving and upgrading demand.

One new project totalling 221,000 sqm entered the CBD market in 1Q26. As a result, the CBD market's average vacancy rate edged up by 1.2 ppts q-o-q to 19.3%. In the decentralised market, the average vacancy rate decreased by 1.3 ppts q-o-q to 28.4%, benefiting from cost-driven upgrading demand and a lack of new supply this quarter.

Overall rents remained in a downward cycle, while project performance diverged further. In the CBD, rents decreased by 1.2% q-o-q to RMB 6.3 per sqm per day, representing a 1.6 percentage-point narrowing in the pace of decline compared to 4Q25. In the decentralised market, rents fell by 1.5% q-o-q to RMB 4.1 per sqm per day, representing a 1.2 percentage-point narrowing in the pace of decline compared to 4Q25. Some projects became less accommodating with rental concessions, particularly for projects that have either successfully renewed anchor tenants or reached their target occupancy rates. That said, given the ample available leasing space and continued competition from newly completed projects, overall market rents remained under pressure.

In 1Q26, net absorption in Shanghai’s business park market reached 255,000 sqm. Faced with continued new supply, tenants actively sought to balance upgrade opportunities with cost-saving measures. According to Stephen Yu, Head of Business Park Services for JLL Shanghai Office Leasing Advisory, “TMT and advanced manufacturing companies were the key drivers of demand. Demand from life sciences companies also displayed early signs of recovery, while demand from government-supported incubators and research institutions remained relatively active.”

Six new projects totalling 547,800 sqm of GFA were completed in this quarter, pushing the average vacancy rate up by 0.9 ppts q-o-q to 32.4%. Substantial new supply continued to weigh on rents, which declined by 1.2% q-o-q to RMB 3.3 per sqm per day.

In 1Q26, policymakers rolled out a package of supportive measures, including the extension of trade-in subsidies, the introduction of new consumption loan incentives, and the expansion of visa-free entry, to bolster consumer confidence. According to Neo Huang, “Leasing demand remained resilient across sectors such as sportswear, collectible toys, consumer electronics, and affordable dining, underpinned by shifting consumption trends and targeted policy stimulus.”

More brands opted for large-format stores in high-footfall prime locations to create immersive experiences and showcase brand narratives. This shift supported leasing momentum in prime areas, reducing prime vacancy rate by 0.3 ppts to 8.1% in 1Q26. However, decentralised areas continued to contend with elevated vacancy rates and relatively cautious leasing demand, with the vacancy rate edging up by 0.2 ppts q-o-q to 13.5% in 1Q26.

No new retail supply was recorded in 1Q26. Rental declines moderated amid improving consumer confidence and leasing activity. Prime ground floor rents fell 0.3% q-o-q to RMB 41.7 per sqm per day while decentralised rents declined 1.0% q-o-q to RMB 14.3 per sqm per day.

Looking ahead, emerging consumer trends related to smart technology, quality-oriented lifestyle, value-for-money preferences and emotional value will continue to drive retail leasing demand. Meanwhile, service consumption is poised to accelerate and fuel overall consumer spending growth. Demand in sectors such as culture and entertainment, sports events, education services, and health consulting is expected to expand further, creating new opportunities for retail properties in the coming years.

Leasing activity sustained the recovery momentum from 2025, recording net absorption of over 280,000 sqm in 1Q26. Current tenant-favourable market conditions continued to create upgrading opportunities for many local occupiers. In 1Q26, 3PL providers remained the primary demand driver. Landlords responded by offering flexible lease terms to attract tenants, helping the average vacancy rate decline by 2.6 ppts to 25.1% over the quarter.

No new projects reached completion this quarter. Over the remainder of the year, four projects totalling 476,000 sqm are scheduled to reach completion, representing only 46% of the total new supply recorded in 2025. In 2026, new supply will be concentrated in three Shanghai submarkets including Songjiang, Jiading, and Qingpu, with the Songjiang submarket accounting for the largest share. The new supply pipeline is expected to exert upward pressure on short-term vacancy rates in the area.

Overall rents decreased by 3.4% q-o-q to RMB 1.08 per sqm per day in 1Q26. Hong Yin, Head of Logistics & Industrial for JLL China remarked, “While supply-side pressure is expected to ease from 2026 onward, the average vacancy rate is projected to hover above 20% and rents will stay under pressure. That said, the pace of rental declines is anticipated to moderate, with performance diverging further across submarkets.”

In 1Q26, Shanghai’s investment market saw increased activity from large-scale capital sources, with assets within the inner ring road experiencing robust transaction momentum. The quarter recorded a total of 24 en-bloc transactions, amounting to a combined volume of RMB 14.6 billion, up 27% year-on-year. Driven by several landmark office asset deals, the average transaction size reached RMB 610 million, a 27% increase compared to RMB 480 million in 1Q25.

By geographic location, 15 of the 24 deals recorded this quarter involved assets within the inner ring road, with the combined transaction volume reaching RMB 10.3 billion, accounting for 70% of this quarter’s total transaction volume. At the same time, location-based divergence became increasingly pronounced. Transactions in non-core areas remained limited, reflecting a market marked by a scarcity of high-quality core assets, while supply in outer ring areas remained elevated.

In 1Q26, landmark office assets were highly favoured by large-scale capital sources, with core-area office assets remaining investors’ top choice. Office transactions totalled RMB 9.7 billion, accounting for 66% of the total transaction volume and 54% of the total deal count. Among other asset classes, retail assets represented 19% of the quarter’s transaction volume, hotels represented 9%, rental housing represented 5%, and industrial assets accounted for 1%.

By investment purpose, self-use demand rose to 42% this quarter, marking a significant increase compared to the full-year 2025 level. Coupled with current preferential lending interest rate policies, this trend has further encouraged self-use buyers to enter the market. By investor type, domestic companies and high-net-worth individuals remained active, while capital from Hong Kong and Southeast Asia also began actively investing in Shanghai’s core assets.

Ling Sun, Head of JLL Capital Markets East China commented, “The availability of projects for sale in Shanghai’s prime areas is on a steady decline as investors continue to pursue this type of asset. We therefore expect their prices to be entering a bottoming-out phase.”

Shanghai’s hotel market continued to demonstrate strong momentum in early 2026, with occupancy, average rates, and visitor volumes all rising. Fuelled by the robust rebound in both international and domestic travel demand, the city welcomed approximately 1.15 million inbound international visitors in the first two months 2026, up 21.4% y-o-y. Foreign visitors accounted for 75% of these arrivals, in line with pre-pandemic levels. During the same period, five-star hotels recorded a 2.4-percentage-point y-o-y increase in occupancy, a 6.6% rise in average daily rate (ADR), and an 11.1% y-o-y growth in revenue per available room (RevPAR). Holiday travel further underscored this momentum: the nine-day Chinese New Year holiday attracted 21.7 million tourists, up 8.4% y-o-y, while the three-day Qingming holiday drew 7.4 million visitors, up 5.6% y-o-y.

One luxury hotel opened in 1Q26. The market also saw strategic supply expansion with the debut of the 267-room Andaz Shanghai ITC in early February, marking the first luxury hotel in Xujiahui. Shanghai is expected to see approximately 1,800 new upscale and luxury hotel rooms in the remainder of the year.

“Shanghai is experiencing a powerful rebound in visitor arrivals, which is driving solid performance across the hotel sector. Newly opened hotels are expected to bolster the competitiveness of key commercial districts and advance integrated urban development,” said Tao Zhou, Managing Director, Head of JLL Hotels & Hospitality Group Greater China.