News release

COVID-19 impacts felt across property sectors; fresh food e-commerce warehouse demand rises

According to JLL Shanghai 2020 First Quarter Property Review

April 09, 2020

Shanghai, April 9, 2020 – The outbreak of COVID-19 and corresponding containment measures impacted Shanghai’s property market, with effects varying across sectors. “There is still much uncertainty at this stage as the global environment evolves, but at the same time we are seeing business activities in Shanghai start to regain momentum, indicating the resilience of the Shanghai market,” said Eddie Ng, Managing Director for JLL East China.

  • The retail market, particularly offline sales, took a hit due to unprecedented control measures in the first quarter.
  • Office leasing saw more renewals due to more conservative leasing strategies from tenants, as well as fit-out and inspection challenges in the first quarter.
  • Logistics asset performance felt the smallest impact from the quarter’s extreme circumstances, amid a lack of supply and leasing supported by resilient tenant types like fresh food e-commerce, which performed well in the outbreak.
  • In the residential sector, sales of both mass market and high-end homes fell amid disruptions from the outbreak.
  • Foreign investors have adopted a wait-and-see attitude in the short term. The investment market is expected to continue to slow in the second quarter.
Grade A Office

The COVID-19 outbreak impacted office leasing demand as economic uncertainty rose and businesses postponed decisions for the duration of the outbreak. Tenants became more conservative on leasing strategies, and some companies reassessed office requirements. Leasing progress for some firms faced delays due to tightened budgets as well as work delays that made it challenging to complete inspections and fit-outs. More renewals were captured in the market, and some landlords took the opportunity to consider longer-term leases in the face of upcoming competition.

Soft demand due to the outbreak led to declining rents, especially in decentralised submarkets with higher vacancy. CBD rents were relatively resilient, decreasing of 0.9% q-o-q, as projects there are mainly stabilized and renewals increased. Decentralised rents fell 2.4% q-o-q.

Several project completions were pushed back to later in 2020 as a result of work delays as well as landlords’ strategic adjustments to deal with the outbreak.

“While the outbreak presents immediate challenges, we believe the market will benefit from policy support, and resilient sectors such as financial services, TMT, and healthcare will reinforce their significance to office demand over the medium-to-long term,” said Anny Zhang, Head of Markets for JLL China.

Business Parks

Overall rents edged down in the first quarter, and several projects delayed their completion dates due to the outbreak. Two projects with a combined GFA of 61,234 sqm were completed in Jinqiao in 1Q20, while several others faced construction delays. Overall demand softened as business was postponed and site inspections, lease negotiations, and fit-outs were constrained by health and safety concerns.

Certain sectors that provided much-needed services such as online platforms, gaming and pharmaceutical companies remained active in the market. For example, Dingdong Maicai, an online fresh food ordering platform, expanded another 2,000 sqm in Zhangjiang EBA Campus. Under pressure from softened demand and increasing economic uncertainties, overall rents edged down 1.4% q-o-q to RMB 4.3 per sqm per day.


The outbreak and lockdown disrupted business and retail sales. Many F&B tenants experienced distress, and those with insufficient cash flows faced store closure. In the first quarter, vacancy rate rose from 8.6% to 9.3% in the prime market, and decentralized vacancy rate rose from 9.2% to 10.2%. Fashion retailers accelerated online expansion and resorted to flexible leasing in offices and malls to digest inventories. Wellness-related tenants including clinics and gyms halted operations during quarantine, though consumers’ rising health consciousness may boost their expansion afterwards.

Citywide new supply fell to zero for the first time since 2006, as the lockdown led to delays in both leasing progress and resumption of work that pushed back projects’ scheduled openings. That said, the rising rate of malls re-opening for business and gradual recovery in foot traffic at the end of March as most people return to work have been positive signals for operators and retailers’ confidence in Shanghai’s consumer market.

Prime open-market ground floor base rental growth decelerated to 0.3% y-o-y to reach RMB 49.4 per sqm per day; decentralised rents fell 0.3% y-o-y to RMB 19.8 per sqm per day. Fallout from the outbreak is likely to be felt into the next few quarters, though pent-up desire to shop may benefit the recovery of certain tenants and accelerate store expansions in 2H20. Ellen Wei, Head of Retail for JLL China, indicated that COVID-19 has led landlords and retailers to boost integration of online and offline retailing, forming a closed-loop ecosystem to better engage customers and enhance sales.


Warehouses played a key role under the outbreak and leasing demand held up in 1Q20, with overall net absorption reaching 78,500 sqm. Leasing was strong leading up to the outbreak, with several foreign and domestic 3PLs securing large spaces throughout Shanghai. Retailers, auto parts makers, and emerging drivers like medical equipment firms also contributed to take-up. Demand from some tenant segments showed strength even during the outbreak. For example, the fresh food e-commerce industry had been growing strongly previously, and achieved new prominence during the outbreak. In addition, backed-up supply chains led some 3PLs to lease space for temporary storage in eastern parts of Shanghai.

Shanghai’s supply drought extended for another quarter as projects saw construction disrupted by outbreak containment measures as well as cautious efforts to return to normal, which led to delays in official procedures like getting fire permits. The overall vacancy rate declined 1.3 ppts to 5.3% due to the lack of new supply as well as continued leasing progress.


Home sales activity fell amid the COVID-19 outbreak, with mass market primary sales volume falling 37.4% y-o-y to 960,463 sqm. Sales progress was delayed as showrooms and sales offices were shut to avoid the spread of the virus. Similarly, high-end sales declined 57.0% y-o-y to just 276 units.

Only one high-end project launched for sale in 1Q20: Hysun Bund by Greenland in Huangpu launched 203 units at an average selling price of RMB 138,000 per sqm, and has attracted 323 potential buyers. Located in the South Bund, the project is a mixed-use development including office, retail, residential and hotel components.

We expect Shanghai's housing policies to remain strict in 2020, although more monetary easing can be expected to shore up the economy. A mild sales recovery is likely in the short term as demand delayed by the outbreak gets released. However, sales are likely to slow in 2H20 as tight policy and economic uncertainties weigh on buyers. Developers may accelerate new launches to offset liquidity pressure. New high-quality projects are likely to achieve higher permitted prices than others, while existing projects will hold primary prices stable under price caps.

Capital Markets

The COVID-19 outbreak hit first quarter figures in Shanghai’s investment market, with investment volumes reaching RMB 20.4 billion, down 58% y-o-y. Of this, 92% of deals took place in the office sector. Most transacted space was acquired by domestic financial institutions for use as office headquarters.

The city took unprecedented control measures in the first quarter, leading to widespread impact on real estate markets. Investor sentiment was further affected as many economies around the world suffered from the spread of the Covid-19. The investment market is expected to continue to slow in the second quarter.

“Foreign investors have adopted a wait-and-see attitude in the short term and we are not expecting a swift rebound. However, foreign investors remain attracted to the China market’s longer-term fundamentals, and we have seen business activities in China getting back on track as more economic green shoots appear,” said Jim Yip, Head of Capital Markets, JLL China & East China

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 $18.0 billion, operations in over 80 countries and a global workforce of more than 93,000 as of December 31, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit