News release

China’s rental housing market enters a new golden age of promising opportunities

JLL releases its latest China rental housing research – New Journey: Onwards and Upwards

October 21, 2021

Shanghai, 21 Oct 2021 – Following a period of market reshuffling and fragmentation, companies that maintained steady operations in China’s rental housing sector have successfully developed business models suitable for long-term development. According to an updated report published by JLL, China’s rental housing space will continue to mature with support from four major drivers: favourable demographic trends, rising thresholds of home ownership, policy support, and capital investment.

The results of JLL’s “Rental Housing Investment Sentiments Survey 2021” shows that China’s rental housing sector is attracting an increasing number of investors who expect a stable return of between 4.5% and 5.5%. As China’s REITs pilot programme continues to evolve, it is likely that REITs will emerge as an alternative exit channel for rental housing investors.

New Journey: Onwards and Upwards - China Rental Housing White Paper is the firm’s second publication on this sector since the 2018 issuance of Opportunity knocks: The rise of China’s rental housing market. The paper aims to provide market players with in-depth insights into this emerging sector.

“In 2018, the focus was more on how the market’s structure might develop and the necessary steps required to reach a new level of maturity. We are encouraged to see that the market has aligned to the trajectory we outlined earlier, and currently entering a new phase with additional promising opportunities,” says Daniel Yao, Head of Research, JLL China.

Total stock of rental housing almost doubled in three years but demand has diversified

In 2017 and 2018, beneficial policies encouraged many companies to enter the rental housing market and some of these players expanded aggressively. Following a period of market reshuffling in 2019 and 2020, China’s rental housing market has entered a new golden age of opportunities.

Based on JLL’s estimation, the total number of rental housing units operated by the top ten players almost doubled from 356,000 units in 2018 to 730,000 units in 2020. In addition, the average occupancy rate reached 95% for stable projects under operation for over six months. It is also noteworthy that the mid-to-high-end rental housing market is gradually expanding in major cities.

The primary source of demand for rental housing is still fresh graduates and young professionals. However, the types of renters have gradually broadened to include mid-to-senior professionals in corporates, family tenants accompanying children, small business owners, self-employed individuals, university students, and others with short-term leasing demand. This indicates that rental housing products have been gradually accepted by more diversified tenant groups in China.

Looking ahead, China’s rental housing sector is likely to see a further boost in both quantity and quality. Tenant profile will continue to diversify as rental housing developers and owners launch new generation products to capture new market segmentations such as young couples and families.

Investors favour Beijing, Shanghai and Shenzhen the most, with an expected return to be between 4.5% and 5.5%

An increasing number of foreign and domestic groups are turning their focus to China’s rental housing sector, given the market’s strong fundamentals, policy support, and government commitment to curb speculative housing investments. JLL invited more than thirty investors from various backgrounds to participate in a survey to understand their strategic investment decisions and planning for China’s rental housing sector.

The result shows that investors are primarily focused on existing and emerging Tier 1 cities with strong economy, a high percentage of the non-local population, and high barriers to home ownership, such as Shanghai, Beijing and Shenzhen. Regarding market segmentation, 97% of respondents indicated their interest in the mid-to-high-end rental housing segment which targets at the well-heeled white-collar workers. The survey result also suggests that investors prefer an asset-heavy strategy, with a large majority open to acquiring existing properties such as hotels to convert to rental housing.

Most investors currently expect a stable return of between 4.5% and 5.5% for rental housing projects in China. Compared to the results of JLL’s 2018 survey, the latest survey shows an evident tightening of investors' overall return expectations for rental housing investments. When asked about their outlook for returns over the next five years, 45% of respondents believed returns would remain flat, while 39% predicted yields to compress further.

According to Eric Pang, Head of Capital Markets, JLL China: “As China’s rental housing market matures with lower vacancy risk and stable asset performance, cap rates are expected to continue to converge towards those of traditional commercial assets such as offices.”

Turning today’s challenges into tomorrow’s opportunities with China’s REITs pilot scheme

"Assets are overpriced" and "difficulty in acquiring land/assets" have always been the two biggest challenges that investors face in China’s rental housing market. For most institutional investors, conversion has become the primary rental housing investment model. However, pricing expectations for conversion opportunities located within core areas of Tier 1 cities are generally high. Coupled with anticipated conversion costs, this often results in lower returns than expected for most institutional investors. Therefore, it is necessary for investors to develop an understanding of submarket demand fundamentals and identify reasonably priced strategic conversion opportunities in non-core areas.

If investors want to scale their investment portfolios quickly, acquiring land will prove more efficient than relying on conversion opportunities. However, it is still difficult for institutional investors to acquire land in the local market. Instead, they should consider partnering with state-owned enterprises and developers who have the advantages of having land inventories and operational management experience. It can be a win-win situation for the market if all players use their unique ways to address challenges effectively.

In addition, low market liquidity, as the third biggest challenge, has brought investors’ attention to exit mechanisms. In the immediate term, a single asset or portfolio sale is the main exit route for rental housing investment, while REITs are expected to improve market liquidity in the medium term.

“Housing and REITs work together tightly; while the current policy only includes affordable rental housing in China’s REITs pilot, we believe it will eventually include market-oriented rental housing,” says George Xiong, Executive Director of Valuation Advisory Services, JLL China. “Rental housing is likely to become another key battlefield in China’s REITs market, and REITs will emerge as one of the potential exit strategies for rental housing investors.”

Click here to download New Journey: Onwards and Upwards - China Rental Housing White Paper

Note: This report focuses on market-based rental housing that follows this single-ownership model. This model is further characterised by lease periods of more than six months and the unified provision of essential services by a property management company. Services are mainly focused on cleaning common areas and emphasising the sharing of facilities, such as open kitchens, gyms, meeting areas and other entertainment facilities.


About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.6 billion in 2020, operations in over 80 countries and a global workforce of more than 92,000 as of June 30, 2021. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit