Gearing up for Steady Growth

JLL 2019 Shanghai Office Market Outlook

March 21, 2019

Shanghai - Since the first Grade A office buildings were built in the 1990s, the Shanghai office market has experienced nearly 30 years of rapid development. In addition to its mature market structure, we are still constantly seeing new breakthroughs and market diversification. During this year's ‘Two Sessions’ legislative meetings in Beijing, Premier Li Keqiang published a 2019 GDP growth target for 6%-6.5%. In the face of this slowdown in China's economic growth, what opportunities and challenges will the Shanghai office market face in 2019? How should developers and investors adapt to new trends to promote the sustainable and healthy development of Shanghai’s office market?

Recently, JLL (NYSE: JLL), held the “Gearing up for Steady Growth” – 2019 Shanghai Office Market Outlook Seminar to explore these issues. Over 200 guests attended the event, where JLL experts as well as guest speakers discussed the development of the Shanghai office market in 2019 in the context of the macro market economy. Eddie Ng, Managing Director of JLL East China, commented: “2019 is a year of significant challenges and opportunities. The market will be highly divergent, and the industries active in the tenant market will differ somewhat to those in 2018.”

Macroeconomics enters transition period, with financial market opening and technological innovation becoming market drivers

The Chinese economy is experiencing a transition period in terms of its growth rate. In 2018, due to a series of policies such as deleveraging, China’s quarterly GDP showed a significant decline in year-on-year growth rate. Private enterprises and some small and medium-sized enterprises are facing loan difficulties, which to a degree has impacted office leasing demand. The uncertainty of the Sino-US trade war has also continued to influence the direction of the market.

In order to protect the macro economy, the government is taking active measures to reduce the negative impact of trade friction by accelerating the pace of a new round of opening up to the world. As the financial services industry, automobile sector and other fields gradually see caps on foreign holdings removed and market access relaxed, office demand from financial institutions will become a major driving force in the office leasing market. In addition, large financial institutions with existing market presences as well as new market entrants and small financial institutions, demand for office space still has a lot of room for expansion compared with the international average. This potential demand for space – combined with the benefits from the policy of opening the financial market - will undoubtedly provide tailwinds for the office market.

Emerging companies are gradually becoming active “users” in the office leasing market. Under the favourable tax reduction policy, such companies will form an important source of demand for office space. Although newly emerging companies have relatively low rental affordability, they have been able to support a strong mid-market for office leasing. In addition, technology sectors such as artificial intelligence, immersive experiences, and data platforms will also demonstrate vigorous growth potential. JLL also expects infrastructure investment will “restart” this year, with added emphasis on next-generation information infrastructure investments such as 5G, industrial internet, and the Internet of Things.

Mid-range demand will dominate the market, and building divergence will further intensify

According to JLL research data, more than 70% of both new supply and existing projects with more than 10,000 sqm of available space is distributed in decentralized areas. With the expansion of the metro network, more and more companies are considering high-quality office properties in decentralized areas when selecting office locations. In these areas, we found that most of the properties can realise rents in the range of RMB 5-8 per square meter/day. Although rents in these areas are still far from the top of the pyramid, they cover the widest range of industries, including high-tech, new media, manufacturing, medicine, energy, and logistics.

At the same time, the Shanghai office market will be highly divergent in 2019. In addition to differentiation between the sectors, there is a growing divergence in rents between buildings. In the future, ups and downs in both policies and the market will become the norm. For Shanghai’s office market players, the key challenges will be the continuous increase in competitors along with the constant adjustment of tenants. This will require a deeper understanding of tenants needs’ in the new era as well as a more flexible approach.

Daniel Yao, Head of Research for JLL China, said: “As the Chinese idiom goes ‘Do not panic when things change’. A rational evaluation of market trends is the basis for remaining calm, and taking action will become a trump card in the highly differentiated market in 2019."

Anny Zhang, Head of Markets for JLL China, stated that finance, TMT (Technology, Media, and Telecoms) and the manufacturing trade will become the main forces driving leasing demand in the market in 2019. More and more overseas financial institutions have re-launched plans to enter the Chinese market. While Lujiazui and North Bund are most favoured by such financial institutions, the TMT industry is more inclined towards business parks, and areas such as Zhangjiang, Caohejing and Xuhui Riverside will benefit in 2019. Due to the continuous influence of the China International Import Expo, the expansion demand from firms in manufacturing and import and export trade will further increase, and the speed at which office buildings in Hongqiao and Qiantan achieve full occupancy will be greatly increased.

Click here to return to the live broadcast of the seminar.

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About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 90,000 as of December 31, 2018. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit

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