News release

Shanghai's Grade A office leasing continues to improve

According to JLL Shanghai 2021 First Quarter Property Review

April 13, 2021

Shanghai, April 13, 2021 – Shanghai’s real estate market began the year on a positive note with continued recovery across the market’s major sectors. “We continued to see office leasing recover in both the CBD and decentralized markets, and office demand reached its highest quarterly level since before the pandemic began,” said Anny Zhang, Managing Director for JLL East China and Head of Markets for JLL China.

Retail vacancy declined further as a pause in new completions and improving takeup led to improving occupancy in both prime and decentralized projects. Strong demand and limited supply allowed logistics rental growth to pick up as vacancy fell close to its pre-pandemic level. Shanghai's government rolled out new tightening measures to stabilize the residential market amid strong homebuying sentiment.

Grade A Office

Overall absorption reached 288,000 sqm in 1Q21 - the highest quarterly level since 2019 - with most take-up driven by the decentralized market. “Cost-saving and consolidations accounted for a large share of leasing, with companies seizing the opportunity presented by lower office rents to upgrade or expand to high-quality new completions,” said Joseph Wang, Head of Tenant Representation Services for Pudong Markets, JLL Shanghai. CBD new absorption continued to rise, reaching 37,000 sqm. Domestic firms grew more active as the the effects of the pandemic continued to recede and business activities picked up. Inquiries from domestic financial services firms - in particular mutual funds and securities companies - increased compared to late 2020.

Four new projects totaling 310,000 sqm reached completion in the first quarter. A new completion in the Xuhui Bund submarket had solid pre-leasing momentum. CBD vacancy decreased 0.1 ppts q-o-q to 11.9%, mainly due to strong leasing performance in recent building completions in the Changning district. Decentralized vacancy fell 0.7 ppts q-o-q to 28.8%, reflecting strong leasing perfromance in the Qiantan, North Bund, and Xuhui Bund submarkets.

CBD rents fell 0.6% q-o-q amid continuing competition from the decentralized market. Decentralized rents edged up 0.6% q-o-q. Submarket performance diverged as areas with strong leasing progress ramped up rental growth while landlords in areas with high vacancy remained negotiable on rents and other incentives, such as rent free and fit out allowance.

Business Parks

Rental growth continued as demand remained stable. Two projects in Shibei with a total GFA of approximately 103,000 sqm reached completion in the first quarter of 2021. Shanghai’s averge business park vacancy rate rose 0.8 ppts to 13.5%. Demand remained stable. Technology companies continued to lead demand in Caohejing submarket. For example, HyperGryphleased 10,000 sqm in Caohejing Center. Chemical and Pharmaceutical companies continued to expand in Zhangjiang, for example as Jing Tian Biotech leased 10,000 sqm in BJT Park. Overall rents in business parks saw positive growth, rising 0.6% q-o-q to RMB 4.4 per sqm per day. 


The leasing market consolidated its brisk recovery from the pandemic's impact in early 2020, with Shanghai's urban area seeing 95,300 sqm of net take-up on leasing progress in existing malls. “New take-up was mainly contributed by retailers of sport experiences as well as sporting goods and sportswear, along with electronics brands and household specialty stores,” said Cathy Huang, Head of Research for JLL East China. Other emerging tenant types showing notable expansion included collectable toy stores, escape rooms, and pet stores.

No new supply was completed in the urban area this quarter. Many projects delayed their scheduled openings due to the Chinese New Year holiday in mid-February, benefitting the recovery in existing malls. Prime vacancy fell from 11.0% to 10.0% as several projects smoothly completed tenant adjustments. Decentralized vacancy fell from 11.4% to 10.8% as active leasing from experience and service-oriented tenants accelerated the take-up of large vacant spaces.

Prime ground floor rent grew 1.3% q-o-q to RMB 49.3 per sqm per day as the boom in upscale consumption strengthened market confidence. Decentralized rents ended their decline, with growth near stable at 0.2% q-o-q and rents at RMB 18.7 per sqm per day, backed by steady recovery in leading regional malls and high-quality community projects.


Net absorption rebounded to 84,065 sqm in the first quarter, as existing projects leased out space amid a lack of new completions. 3PLs continued to be the largest driver of demand, with leases and renewals by international and domestic firms. Additional sources of demand included the e-commerce and manufacturing industries, which leased signifciant space in the Jinshan and Lingang submarkets. “Emerging drivers such as cold chain operators continued to account for a greater share of leasing than before the pandemic, as we saw several cold chain leases completed over the quarter,” said said Richard Huang, Head of Supply Chain and Logistics Service for JLL China.

Vacancy fell as a project that was due for completion was delayed to later in the year, making it the first quarter with no new completions since 1Q20. Amid the rebound in absorption and a lack of new supply, vacancy declined 1.3 ppts to 6.8%, nearly even with the market's vacancy rate in 4Q19, before the start of the pandemic.

Like-for-like rental growth rose slightly from 0.2% q-o-q to 0.7%, with rents reaching RMB 1.52 per sqm per day. Limited supply and strong demand allowed rents to rise at a faster pace, though landlords overall remained more focused on occupancy than raising rents. Rents rose 2.1% in y-o-y terms, down slightly from the quarter before.


Shanghai announced a range of measures to prevent overheating in the housing market, including tighter home purchase restrictions (HPRs) for divorced homebuyers, a new scoring system that prioritizes families buying first homes, raising the threshold for VAT exemptions in secondary transactions, tighter rules for corporates buying homes, and more. Strong sentiment from first-time buyers and upgraders carried into 1Q21. Mass market primary sales volumes rose 6.4% q-o-q to 3.2 million sqm, the highest quarterly figure since 4Q16. Similarly, the high-end segment saw 892 units sold, compared to 591 units in the previous quarter.

Developers generally adopted a wait-and-see attitude, postponing new launches while they assessed the impact of the new scoring system. New launches in the mass market were impacted both by the new policy announcements as well as the seasonal effect of the Chinese New Year (CNY) holiday, which led new launches to fall 60% q-o-q to 1.0 million sqm. No new high-end projects were launched in the quarter.

High-end projects kept prices stable in 1Q21. Secondary market price growth decelerated 0.2 ppts to 3.3% q-o-q, with most growth achieved in January before the government rolled out the aforementioned policies to curb speculation.

This quarter's new tightening policies will help curb speculation and stabilize market expectations. However, as real buying demand remains intact, we still expect the primary market to maintain healthy sales momentum this year, though price growth is likely to slow in the following quarters.

Capital Markets

Shanghai’s total commercial real estate transaction volume in 1Q21 was recorded at RMB 13.6 billion, representing a 46% q-o-q decline. The previous quarter had seen a strong year-end rebound in transaction volumes, but the first quarter’s decline shows that investment sentiment remains fragile.

In a change from previous quarters in which transactions were dominated by end-user purchases of office properties, the first quarter two deals for serviced apartments by private investors that signalled Shanghai’s residential market remains strong. The investors are pursuing a strata-sale strategy after making en-bloc acquisitions of the serviced apartment towers.

The first quarter’s biggest investment highlight was a RMB 2.7 billion deal in which Link REIT purchased a 50% share in a regional mall in Shanghai from GIC. “The deal shows that high quality, stabilized, long term investment assets remain sought after by institutional investors,” said Jim Yip, Head of Capital Markets for JLL East China.


The new hotel pipeline began to pick up, with a majority of projects within the upscale segment. A total of 5,644 guest rooms are expected to enter the market in 2021, with upscale hotels accounting for about 50% of future pipeline. Influenced by the post-pandemic “new travel norm” in which people tend to prefer short-distance travel, hotel investors are also making strategic plans to accommodate to this new trend. Hotel groups such as Hilton and Marriott are also strategically expanding their luxury portfolios in Shanghai’s suburban areas, with properties such as the Hilton Shanghai Songjiang Guangfulin Hotel and JW Marriott Hotel Shanghai Fengxian.

Shanghai’s hotel investment market remains resilient, with serviced apartments the most popular amongst investors. Shanghai's total hotel and serviced apartment transaction volume in 2020 was RMB 5.6 billion, ranking first in China and representing over 75% of total hotel transaction volume. Benefitting from stable long-stay demand, the trading performance of serviced apartments has remained resilient, with occupancy increasing y-o-y by 27.8% to 64% as at February 2021. In the midst of global economic uncertainty, assets that can bring stabilised or quick returns such as rental apartments or properties with strata-sale potential will likely continue to drive sales activity this year. Serviced apartments transactions announced this year include Fraser Place Xintiandi and Somerset Xuhui.

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 $16.6 billion, operations in over 80 countries and a global workforce of more than 91,000 as of December 31, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit