News release

Demand up across sectors in Shanghai’s property market as pandemic comes under control

According to JLL Shanghai 2020 Third Quarter Property Review

October 13, 2020

Shanghai, October 13, 2020 – Demand improved in Shanghai’s real estate market as the COVID-19 outbreak was brought under control. “Corporate sentiment is improving as China has gotten back to normal, allowing us to see a pick up in demand across several sectors this quarter in Shanghai,” said Eddie Ng, Managing Director for JLL East China.

Office leasing continued to rise as firms remained focused on renewals and cost-saving relocations. Demand from auto showrooms, lifestyle specialty shops, and multi-brand beauty chains contributed to improvement in retail leasing. Logistics demand rose as a mix of traditional and emerging demand drivers sought leasing opportunities. The residential market’s momentum remained strong with the help of large new supply, solid upgrade demand and loosened price restrictions. Shanghai’s overall investment activity remained slow, though investors showed increased interest in alternative sectors.

Grade A Office

Leasing demand improved, led by decentralised market. Decentralized net absorption reached 156,000 sqm, up from 86,000 sqm in Q2 and -33,000 sqm in Q1.  Net absorption in the CBD reached 6,200 sqm after two quarters of negative absorption. “With the pandemic largely under control, demand improved as companies became more confident to make leasing decisions,” said Anny Zhang, Head of Markets for JLL China. While leasing improved, many firms focused on conservative strategies like renewals or cost-saving relocations, a result of the pandemic's business impacts and plentiful cost-saving options in the market. Domestic securities firms and law firms remained active, and demand continued to rise from the TMT and healthcare sectors.

Four new projects added 431,000 sqm to Shanghai office market, with IM Shanghai reaching completion in the CBD with a total GFA of 122,000 sqm. Three new projects completed in the decentralized market for a total of 309,000 sqm. The CBD vacancy rate rose 1.5 ppts q-o-q to 12.1%, mainly a result of new supply. Strong demand from firms with cost-saving requirements allowed the decentralized vacancy rate to rise only slightly 0.8 ppts q-q to 31.0% despite the influx of new projects.

CBD rents declined 2.1% q-o-q as landlords became more flexible on renewals to entice tenants who might consider relocation to decentralized areas. Decentralized rents fell 2.6% q-o-q, though the pace of decline eased 1.2 ppts q-o-q. Some landlords offered incentives like customized fitouts to encourage relocations and save tenants' capex.

Business Parks

TMT and healthcare sectors boosted demand in 3Q20. No new projects entered the market this quarter. Recent completions received strong inquiries, and net absorption in core business parks reached 204,000 sqm. The tech sector along with other firms in the TMT industry chain rapidly expanded. The share of demand from healthcare and biomedical companies also increased after COVID-19 boosted awareness of these industries. For example, Zai Lab leased sizable space in Zhangjiang Headquarters. Overall rent remained nearly flat, down 0.5% q-o-q to 4.4 per sqm per day.


The ongoing recovery in China’s consumer spending restored retailers' confidence to expand, with Shanghai's net absorption returning to positive 21,000 sqm in 3Q. The luxury segment’s sales showed strength as global travel restrictions accelerated the repatriation of luxury goods spending. The orderly reopening of cinemas since July marked the recovery of all tenant types in malls. “This quarter’s improvement in leasing demand was backed by increasing leasing activities from auto showrooms, lifestyle specialty stores and multi-brand beauty stores,” said Ellen Wei, Head of Retail for JLL China.

One refurbished mall reopened in the third quarter, as Shanghai Plaza finished refurbishment and reopened on Huaihai Road. Four new decentralized projects postponed their openings to next year due to slow leasing progress. Prime vacancy decreased from 12.5% to 11.8% as the impact of COVID-19 on tenant move-outs faded and improving leasing activity drove steady progress in tenant adjustments. Decentralized vacancy edged up from 11.4% to 11.6% as larger supply volume and more challenging leasing situation led to a slower recovery than in the prime area.

Prime ground floor rents stabilized to 0.2% q-o-q, reaching RMB 48.6 per sqm per day, as a continued recovery in sales in mid-to-high-end malls not only improved landlords' confidence but also enhanced retailers' rental affordability.  While some community malls continued to outperform, overall decentralized rents fell by 1.9% q-o-q to RMB 18.9 per sqm per day, as increasing vacancy rates and slow leasing progress in general put pressure on landlords.


Net absorption rebounded from second quarter’s negative absorption, reaching 197,010 sqm, its highest quarterly level since 2Q18. “There was significant leasing progress in 2Q20’s completions as well as older projects,” said Richard Huang, Head of Supply Chain and Logistics Service for JLL China. Leasing demand was strong from international and domestic 3PLs, as well as manufacturers. Emerging demand drivers also were active, with pharmaceutical firms, fresh food e-commerce players, and cold chain operators all taking space. We also observed some short-term leases from firms preparing for year-end shopping festivals.

Three new projects reached completion, with Vailog completing its 63,149 sqm project in Jinshan submarket, where Songli Jinshan Tinglin Park (84,853 sqm) was also delivered. LIM completed its 48,694 sqm Qingpu Logistics Park. Vacancy declined from 7.5% to 7.3% as vacancy in some of the new completions was balanced by strong leasing elsewhere. Quarterly rental growth edged down but stayed positive, with rents rising 0.3% q-o-q as landlords prioritized filling space versus aggressively raising rents.


Shanghai's primary market continued to gain momentum, with mass market sales reaching 3.0 million sqm, up 21.8% q-o-q and 35.4% y-o-y. The recovery in home sales was driven in particular by the loosening of price caps earlier this year, which lifted the market's price expectations and spurred home seekers in active buying. High-end market sentiment remained strong backed by solid upgrade demand, and new projects located in areas with comprehensive plans for public facilities, retail amenities and school districts were well-received and snapped up within one day. High-end sales reached 815 units in 3Q20, down 33.3% q-o-q, mainly due to reduced new launches.

The mass market continued to see a supply surge, with looser price caps and improved sales sentiment leading developers to accelerate new launches. As a result, a total of 2.8 million sqm was launched in the mass market, up 31.0% q-o-q. High-end supply moderated in 3Q20 with four projects launching 447 units, down 72.1% q-o-q from the high-end market’s own 2Q20 supply boom. Primary high-end prices rose by 0.3% q-o-q to RMB 120,281 per sqm, as new projects obtained higher permitted prices under looser price caps.

Looking ahead, we expect overall sales in 2020 to surpass those of 2019 with continued sales recovery. Looser price caps may allow primary prices to continue increasing mildly in 4Q. With Shanghai recently relaxing household registration rules for top universities' graduates, demand from first-time buyers is likely to rise over the next few years. In light of the recent "three red lines" regulations aiming to control developers' debt growth, we expect developers to continue to reduce liabilities. Continued acceleration of new launches and a slowdown in land acquisition are expected in the coming quarters.

Capital Markets

Shanghai’s real estate investment market continued to be affected by moderating sentiment. Total transactions in 3Q20 reached RMB 14.5 billion, down 18.6% y-o-y and 16.6% lower q-o-q. Office assets remained the top choice for buyers, and total office transactions reached RMB 9.5 billion, accounting for 65.5% of total transaction volumes in Shanghai.

Acquisitions by end users, especially companies in the TMT and financial services sectors, continue to dominate. For example, a technology company that is listed on the Star Market purchased an office project in Shanghai’s Caohejing area for owner occupation. In addition, Sealand Securities has agreed to buy the C1 building in Greenland Bund Centre for RMB 1.4 billion. These transactions were in line with our expectation that owner-occupiers would remain active over 2020.

Meanwhile, due in part to economic uncertainties and large supply in the office market, institutional investors are shifting some of their attention to seeking alternative assets. Data centers, logistics and industrial assets have become popular, with total transaction volume reaching RMB 2.7 billion, accounting for 18.6% of the total transaction volume in the third quarter.

Looking ahead to the last quarter of 2020, we expect investor sentiment and transaction volumes to stay patchy. “The logistics sector continues to exhibit strong fundamentals and is expected to be resilient moving forward. Alternative asset classes such as data centers have become compelling investment options for many investors. We expect investors to mitigate risks by increasing diversification within their portfolios, especially through increasing their exposure to logistics and alternatives sectors,” said Jim Yip, Head of Capital Markets for 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 in 2019, operations in over 80 countries and a global workforce of nearly 93,000 as of June 30, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit