Market expectations adjust as most tenants remain conservative. Market uncertainty led tenants’ leasing strategies to remain cautious. Landlord sentiment was impacted as leasing progress slowed further. According to Stephen Yu, Head of Business Park Services for JLL Shanghai Office Leasing Advisory, tech-intensive companies continued to drive demand. Leasing was strong among integrated circuitry firms and advanced manufacturing companies in fields like new energy vehicles (NEVs) and NEV-related upstream and downstream businesses. Two projects with a total GFA of 157,000 sqm entered the market. Shanghai’s overall business park vacancy rose 1.6 ppts q-o-q to 15.3%. Landlords have proactively adjusted pricing strategies to match the market’s slow pace of recovery and significant supply pressure. As a result, overall rents fell 1.7% q-o-q to RMB 4.5 per sqm per day. 

Shanghai's primary mass-market home sales increased 6.1% q-o-q to around 2.7 million sqm, thanks to a rebound in new supply this quarter. Nevertheless, 2Q23 saw Shanghai's homebuying sentiment moderate since much pent-up demand was already released in 1Q23, and sales performance further diverged across new projects. Among the quarter’s new launches, projects with larger unit sizes and prime locations were well received by upgraders. High-end sales momentum was resilient overall, with 1,164 high-end units registered as sold, up 65.6% from 1Q23.

The pace of new project launches picked up over the quarter, leading to around 2.8 million sqm of new supply being launched, up 53.8% q-o-q and 159.1% y-o-y. The quarter saw six new high-end projects launch 1,389 units for pre-sale, up 564.6% compared to the preceding quarter. 

Primary prices edged up a further 0.6% q-o-q to RMB 132,252 per sqm, a result of relatively looser price caps. In the secondary market, however, economic uncertainty led more buyers to adopt a wait-and-see attitude, resulting in fewer inquiries and impacting individual owners' confidence. As a result, secondary prices fell 0.9% q-o-q.

“We expect buying sentiment to remain moderate amid continued economic uncertainty and tight local housing policies,” said Sherril Sheng, Research Director for JLL China Residential Sector. “That said, high-end projects with good value will continue to be favoured by upgrade buyers.” Primary prices are expected to continue to climb modestly in the near term as price caps remain loose. On the other hand, the fall in home transactions in the secondary market will continue to weigh on the recovery of secondary price.