News release

Market activity steadily recovers from outbreak; Business parks outperform other asset classes

According to JLL Shanghai 2022 Third Quarter Property Review

October 13, 2022

Susan Yu

+86 6133 5797

Vickie Zheng

+86 (21) 6393 3333

Shanghai, Oct 13, 2022 – Shanghai’s market activity began returning to normal in the third quarter after a local COVID-19 outbreak suspended much of the economy earlier in the year. “After almost no new supply last quarter, we saw construction resume and multiple projects complete this quarter, and leasing activity improved across a range of sectors” said Anny Zhang, Managing Director for JLL East China and Head of Office Leasing Advisory for JLL China. 

Citywide office absorption rose this quarter, supported by traditional drivers as well as expanding firms in new strategic sectors. While vacancy rose in the retail market, some sectors like F&B rebounded as consumers returned to malls. A recovery in logistics leasing helped vacancy edge down despite a rebound in new supply. Policy loosening and the release of demand pent up during the outbreak led to a large increase in mass market residential sales. In the investment market, business parks emerged as some of the most popular assets in the city.

Grade A Office

As Shanghai moved past the spring outbreak, citywide net absorption picked up to 104,000 sqm. In the CBD, diversified tenant demand helped the market remain stable. “Financial services and professional services companies continued to drive leasing activity,” said Stanley Jiang, Head of Project Leasing for for JLL Shanghai Office Leasing Advisory. “That said, renewals also increased as tenants overall remained conservative.” Decentralized net absorption reached 129,000 sqm. Inquiries continued to be concentrated in popular submarkets such as Qiantan and Xuhui Bund. Firms in new strategic sectors such as life sciences and new energy vehicles supported leasing momentum, and demand from financial services and TMT companies remained resilient.

Three new projects delivered 277,800 sqm in 3Q22. In the CBD, one new project delivered 115,000 sqm to Xujiahui submarket, leading overall CBD vacancy to rise 1.7 ppts q-o-q to 9.1%. The new project is expected to help upgrade Xujiahui's business atmosphere and maintain the submarket's competitive position in the Puxi CBD. Two decentralized projects with a combined GFA of 163,000 sqm reached completion. High pre-commitment rates and active leasing in recent completions led decentralized vacancy to edge down 0.1 ppts q-o-q to 25.0%.

The CBD’s overall rents edged down by 0.7% q-o-q as lingering effects of the spring COVID outbreak led landlords to become more negotiable on rents to achieve better occupancy. Several experienced landlords proactively adjusted leasing strategies in order to maintain competitiveness. Rents in the decentralized market continued to diverge between buildings, with landlords in high vacancy submarkets providing incentives such as longer rent free periods. In this tenant-favorable market, rents fell by 1.3% q-o-q. Landlords' rental expectations also were impacted by recent slow demand and large upcoming supply.

Business Parks

Shanghai’s business park market remained stable, with overall net absorption reaching 65,000 sqm. “Firms in emerging industries such as life sciences and new energy vehicles (NEVs) continued to show active leasing momentum, helping keep leasing demand resilient. Demand in Jinqiao submarket increased thanks to its industrial base of high-end manufacturers and spillover demand from life science companies in Zhangjiang submarket,” said Stephen Yu, Head of Business Park for JLL Shanghai Office Leasing Advisory. In addition, Zhangjiang and Caohejing submarkets continued to receive considerable leasing inquiries. That said, lingering effects of the outbreak made some tenants cautious, leading some to defer leasing decisions and causing landlords to adjust expectations. One project in Zhangjiang reached completion in the quarter, with most of its inquiries coming from life science companies. Steady growth in leasing transactions reduced overall vacancy to 10.4%. Overall rents remained flat at RMB 4.6 per sqm per day.


Shanghai saw total retail sales recover over 3Q22 as subway passenger traffic and shopping mall foot traffic returned to normal. “Despite the overall slow pace of leasing, we still saw certain categories remain resilient and continue expanding,” said Paige Chuang, Head of Retail Agency for JLL Shanghai. “For example, luxury brands, skincare and perfume, new energy vehicles (NEV) brands, and community supermarkets.” The F&B sector recovered quickly following a sharp contraction amid the outbreak, contributing to 45% of 3Q's newly leased space. Premium F&B brands saw a particularly rapid rebound in leasing.

Two prime malls delivered 60,000 sqm, while two decentralized malls contributed 123,000 sqm of new retail space. JC Plaza launched on West Nanjing Road; the mixed-use project is renovated from a hotel and features many brands' debut stores, and is expected to extend the city's luxury retail landscape. Prime area vacancy rose 3.9 ppts to 13.6% as pandemic effects impacted consumption from tourists and office workers. Decentralized vacancy rose only 2.3 ppts to 12.3% thanks to the resilience of key regional malls, which draw a large consumer base from nearby residents.

Prime ground floor rents declined 3.7% q-o-q while decentralized rents fell 3.9%. Declining citywide rents reflect challenges faced by both landlords and retailers. Landlords have grown more willing to negotiate rental concessions to retain current tenants, while retailers prefer shorter lease terms to stay flexible.


Net absorption rebounded after the first half’s slowdown, rising to 145,000 sqm on the back of resilient leasing demand. While the quarter's leasing was balanced somewhat by new supply, vacancy still slightly decreased from 9.9% to 9.8%. “Drivers of demand varied this quarter,” said Richard Huang, Co-Head of Logistics & Industrial for JLL China. “ For example, we saw local companies including 3PLs make over 5,000 sqm in commitments in a newly completed project, and in a stabilized asset in Songjiang.” New energy vehicle (NEV) firms also continued seeking space, with a well-known NEV maker leasing a Fengxian asset in full upon completion.

Three projects reached completion this quarter following a relatively quiet 2Q. Vanke delivered its Jinshan Caojing Park (42,000 sqm) with solid pre-leasing. Fengxian and Songjiang submarkets each saw one new completion. New Ease also delivered its Songjiang Xinbang Park (55,000 sqm). Two projects in Qingpu and Jinshan are expected to deliver a total of 408,600 sqm over the remainder of the year. ESR Qingpu Yuren alone will contribute 345,000 sqm, increasing Qingpu's total stock by more than 30% and potentially leading to higher vacancy in the submarket.

Rents grew by 0.7% q-o-q and 3.1% y-o-y this quarter, both on a like-for-like basis. The quarter's growth trend was underpinned by stable demand, particularly in Shanghai's more mature submarkets.


Looser monetary policy and a lower loan prime rate (LPR) allowed home sales to recover this quarter, as demand that built up over the first half's COVID outbreak was released. Combined with the quarter's increased supply, these effects allowed total sales volume to rise 188.4% q-o-q (51.6% y-o-y) to about 3.7 million sqm. In the high-end segment, buying momentum remained solid thanks to stable upgrade demand. That said, only 732 high-end units were transacted, mainly a result of reduced high-end supply over the quarter.

After the spring outbreak, Shanghai's government adjusted supply-side policies by accelerating the pre-sales permitting process to support developers' cash flows and satisfy pent-up demand. As a result, this quarter saw supply surge with about 3.6 million sqm launched, up 235.3% q-o-q and 127.5% y-o-y. Only two high-end projects, Suhe Century located at Suhe Creek and Oriental Magnolia located at Qiantan, supplied 785 units in total to the market this quarter. Both projects achieved high pre-commitment rates and nearly sold out, helped by limited competition in the high-end market this quarter.

Primary prices rose 0.4% q-o-q to RMB 126,700 sqm amid looser supply-side measures. In the secondary market, properties with larger unit layouts and high-end residential compounds were popular with upgraders. As a result, high-end secondary prices surged 1.3% q-o-q to RMB 108,700 per sqm. The high-end leasing market remained resilient thanks to demand from families looking for spaces near schools before the start of a new semester, as well as upgraders seeking spacious units after the recent COVID outbreak. As a result, average rents edged up 0.6% q-o-q this quarter.

Shanghai's local housing policy is likely to remain tight through end-2022. “That said, we expect 2022's annual high-end sales volumes to be supported by upgrade demand,” said Sherril Sheng, Research Director for JLL China Residential Sector. Primary prices are expected to edge up in 4Q22 amid slight easing in supply-side policies. In the secondary market, we expect sales activity to slow in the coming quarter given most pent-up upgrade demand was released in 3Q22. We forecast secondary price growth for 2022 to moderate from its 7.2% pace of increase in 2021.

Capital Markets

Shanghai’s investment market saw seventeen transactions with a total transaction volume of RMB 13.6 billion in 3Q22, down 12.3% from 2Q22’s figure of RMB 15.3 billion. The decline in total transaction volume can be attributed to lingering impacts from the second quarter’s COVID-19 outbreak. 

Business parks were highly sought after by investors. Six business park transactions were recorded in the third quarter, all involving the life science sector. Limited supply in Zhangjiang – where life science firms dominate leasing – led investment activity to spill over to other submarkets including Jinqiao and Baoshan. National policy support is expected to continue bolstering the life science sector’s growth. On the other hand, flareups of COVID-19 have created challenges for retail tenants, contributing to a rise in retail property vacancy and raising the difficulty of retail asset operation. Two retail properties were transacted this quarter, with the buyers of both assets planning to renovate and upgrade the projects to take advantage of future opportunities. 

A range of external factors like continued pandemic impacts, global inflation, and interest rate increases in the US have created uncertainty in investment markets and pushed institutional players to take a prudent approach to new investments. According to Sun Ling, Head of Capital Markets for JLL East China, “The current environment presents challenges for foreign investors and has caused them to adopt wait-and-see attitudes toward the market. However, with the implementation of REITs, the rationalization of property asset prices, and the relaxation of central monetary and credit policies, we expected that the investment market will see more promising growth in the fourth quarter.”

About JLL

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