Leasing activities remained subdued in 1Q25, as brands across various sectors remained conservative towards expansions and renewals. Despite the cautious market sentiment, several sectors maintained stable leasing momentum in 1Q25, supported by consumption stimulus policies and consumers' focus on healthy lifestyles, entertainment, and value for money. According to Neo Huang, Head of Office Leasing Advisory for Shanghai and Head of Retail for East China, JLL, “Key growth sectors including sportswear, collectible toys, pet services, VR experiences, and affordable dining, are continue to gain momentum.”

No new supply was recorded in the Shanghai urban area this quarter. Intense competition, coupled with cautious leasing momentum, continues to put the market under pressure. Prime market vacancy rose 0.8 ppts to 9.9% and decentralised market vacancy rose 0.7 ppts to 13.8%. In response to heightened competition, many landlords proactively implement changes through repositioning, renovations, and brand-mix adjustments to enhance asset performance.

Rental decline continued in 1Q25, reflecting cautious market sentiment. Average ground floor rents in the prime areas decreased by 1.4% q-o-q to RMB 43.5 per sqm per day, while decentralised areas fell by 1.6% q-o-q to RMB 15.2 per sqm per day.

Looking ahead, China's focus on boosting consumption in 2025 will involve a combination of policy support. Sectors including sportswear, entertainment, collectible toys, smart home appliances, and 3C electronics are expected to drive active store expansion in 2025.

In the first quarter of 2025, Shanghai’s investment market delivered resilient performance, recording 24 en-bloc transactions with a total transaction volume of RMB 11.46 billion, marking a 20% quarter-on-quarter growth that underscores recovering momentum. Two key trends are prevailing within the market. First, small-scale project transactions remained the mainstream, with the average transaction size continuing to shrink. Transactions below RMB 500 million surged to a historic high of 74%. Second, high-net-worth individuals (HNWIs) and corporate buyers led the investment market, representing 67% of total transactions by transaction volume. Their agile investment strategies have played a positive role in revitalizing existing assets, enhancing market liquidity, and spurring market activity. Transactions for investment purpose continued to rise this quarter, accounting for 86% of total transactions by transaction volume.

In the first quarter of 2025, rental housing emerged as the most sought-after asset class, accounting for 34% of total transaction volume, surpassing office assets for the first time. Insurance institutions played a pivotal role in driving market activity as their interest in large-sized rental housing projects continued to rise. Office ranked second in terms of transaction volume (29%) this quarter, followed by Retail (27%), Hotel (5%), and Business Park (5%).

Ling Sun, Head of JLL Capital Markets East China stated, “The market is undergoing a significant transformation, compelling owners to act decisively to capitalize on emerging opportunities. Many successful transactions this quarter were driven by owners’ agility in adapting strategies to rapidly evolving market conditions. Looking ahead, we expect continued diversification and increased specialization across the investment landscape.”