News release

Pandemic impact felt across property sectors; sound fundamentals augur recovery in second half

According to JLL Shanghai 2022 Second Quarter Property Review

July 12, 2022

Susan Yu

+86 6133 5797

Vickie Zheng

+86 (21) 6393 3333

Shanghai, July 12, 2022 – Epidemic prevention measures aimed at controlling a local outbreak of COVID-19 led to a suspension of much of Shanghai’s business activity in 2Q22, halting construction and leasing activity. With the city beginning to return to normal in June, however, there were signs of recovery as business picked up. “The outbreak’s impacts were significant, but Shanghai’s fundamentals are strong, and we expect to see a recovery in most sectors in the second half of 2022,” said Anny Zhang, Managing Director for JLL East China and Head of Office Leasing Advisory for JLL China.

In the office market, new completion pushed up overall vacancy to edge up. The retail sector felt even larger impacts amid outbreak, though there were signs of recovery in June as consumers’ pent-up demand translated into a quick rebound of sales for certain products from luxury goods to coffee and tea. Logistics take-up and rental growth declined but remained positive as the sector remains well-positioned to take advantage of pandemic-era consumer trends. Sales and new launches in the residential sector fell sharply during the outbreak but showed signs of recovery as the city got back to normal in June. In the Investment market, office assets accounted for more than 80% of the total transaction volume in the second quarter, while rental housing showed resilience. With the outbreak under effective control, investment market is expected to return on track.

Grade A Office

Since business activities resumed in June, office leasing activities gradually recovered. Overall net absorption for the quarter recorded 30,200 sqm. “In the CBD, a downturn in net absorption was primarily caused by tenants following through with pre-outbreak plans to end leases, while new tenants were forced to delay move in decision. Since business resumed in June, on-going leasing deals that were put on hold continued, and many projects received increased inquires and inspections.” said Jacky Zhu, Senior Director for JLL Shanghai Office Leasing Advisory. Net absorption in the decentralized market fell to 37,900 sqm. In terms of sectors, financial and professional services remained resilient, while the life science sector continues to show steady demand. However, some companies under trading, online education, TMT, and also small companies that relies on crucial cash flows were impacted, showing slowdown in demand for office space.

In the CBD, some anticipated projects were delayed until the end of the year. With no new completion, CBD vacancy stabilized at 7.4% within the quarter. Decentralised market saw one new project with 170,000 sqm of office space entering Xuhui Bund submarket. Consequently, decentralised vacancy increased by 1.1% ppts q-o-q to 25.0%. As such, some submarkets with large vacant spaces will face greater competitive pressures. The new project also pushed overall market vacancy to edge up by 0.7ppts to 16.6% in 2Q22.

In the CBD, diverse demand source and high occupancy rate all supported overall rents to remain steady. Some landlords of projects with higher vacancy adjusted expectations due to the outbreak, causing CBD rents to edge down 0.6% q-o-q. In the decentralised market, rental divergence across submarkets intensified. Submarkets with higher vacancy rate faced greater competition, and some landlords are actively adjusting rental expectation. As a result, rents decreased by 1.5% q-o-q.

Business Parks

Shanghai's business park market demonstrated resilience during the outbreak, with overall net absorption reaching 60,000 sqm. Leasing momentum resumed in submarkets where firms in emerging industries such as new energy vehicles (NEVs) and life sciences had been seeking expansion opportunities before the pandemic’s resurgence. Though some ongoing deals faced delays amid recent wave of COVID-19, overall demand was resilient and total transaction volumes saw steady growth. In terms of new supply, one project in Caohejing was completed with a total GFA of 121,000 sqm. The new completion contributed to a rise in overall vacancy to 10.8%. Overall rents remained flat at RMB 4.6 per sqm per day as market sentiment held stable.


Shanghai's outbreak disrupted the city's retail business, with physical stores suffering major losses during the pandemic. Some cash-strapped small brands were forced to close stores, and new leasing was delayed. As a result, net take-up in the urban area fell to negative 172,700 sqm. As business resumed from June 1st, foot traffic and sales revenue gradually recovered. “Luxury brands led the recovery on the back of strong pent-up demand and delayed purchases,” said Paige Chuang, Head of Retail Agency for JLL Shanghai. In addition, coffee and tea brands saw a surge in orders after the resumption of delivery service. Restaurants with outdoor seating saw a quicker recovery.

No new projects were completed in the second quarter. Most projects' construction and leasing progress was halted by the pandemic, leading to delays. In addition, several projects that had planned to open in the second half of 2022 were postponed to 2023. Business disruptions led vacancy in the prime market to rise 0.7 ppts q-o-q to 9.7%. Vacancy in the decentralized market rose from 9.2% to 10.0% as tenants with cash flow problems closed stores, especially those in the F&B, entertainment, and children-education sectors.

Rising vacancy and soft leasing momentum contributed to a citywide decline in rents in 2Q. Prime ground floor rents fell 2.0% q-o-q. Decentralized rents fell 2.9%, mainly a result of tenant mixes favouring F&B and experiential tenants.

“Shanghai will see a gradual, moderate retail recovery over the near term. We expect to see resilience from luxury brands, high-end skincare and perfume, auto showrooms, and coffee and tea brands. Some projects will seize chances to re-position or renovate,” said Paige Chuang.


Leasing in the second quarter was curtailed amid pandemic restrictions. With the resurgence of pandemic impacting leasing activity for most of 2Q22, landlords were experiencing delays in securing new tenants while many existing leases expired. Quarterly net absorption hence declined to 6,000 sqm. “Most of the quarter's new leasing took the form of pre-leases in a new completion in Qingpu,” said Richard Huang, Co-Head of Logistics & Industrial for JLL China. A retailer pre-leased more than 40,000 sqm in the new asset, showing the market confidence over Shanghai’s fundamentals. 

Four out of five projects scheduled to deliver in 2Q22 were delayed as Shanghai's outbreak halted business activity. The quarter's only completion was GLP Xianghuaqiao Logistics Park (120,000 sqm) in Qingpu submarket. This took non-bonded vacancy rate to rise 1.4 ppts from last quarter to 9.9%. Delays stemming from 2Q's outbreak will lead to increased supply pressure in the second half of 2022. Qingpu accounts for more than half of the year's remaining supply. Combined with this quarter's new completion, new supply over the rest of the year could lead to increased vacancy in Qingpu.

Rents grew by 0.7% q-o-q and 3.6% y-o-y on a like-for-like basis. While growth remained positive, it represented a deceleration from the pace of 1Q22.


Sales activities were halted in April and May as project sites and trading centres remained closed during the outbreak. After most epidemic prevention measures lifted in June, projects continued to practice social distancing and buyers were guided to purchase online. Total sales volume for the quarter slumped 52.4% q-o-q and 49.5% y-o-y to about 1.3 million sqm. As the sales progress were accelerated in June, many high-end transactions that had been in progress at the end of 1Q22 were completed via online buying systems in 2Q22. As a result, high-end sales rebounded sharply in June. A total of 1,239 high-end units were sold in this quarter, up 15.9% q-o-q and 154.4% y-o-y.

The outbreak led to only about 1.1 million sqm being launched to the market in 2Q22, down 60.7% q-o-q and 57.8% y-o-y. Most new supply was launched in June as Shanghai began returning to normal. There was no new high-end supply this quarter. Some projects that had been scheduled were postponed to later quarters amid the outbreak. Competition may rise further in 2H22 as the government plans to accelerate new launches by shortening the approval process.

Primary and secondary prices respectively held stable at RMB 126,500 per sqm and RMB 107,300 per sqm as sales activities were halted in April and May. As the epidemic prevention measures were lifted in June, Shanghai's housing market entered a state of gradual recovery, while some buyers and homeowners adopted wait-and-see attitudes in the secondary market.

As Shanghai gets back to normal, we expect the housing market to regain confidence and gradually recover in 2H22. “Shanghai further loosened its residency policy for fresh graduates. This effort to attract talents with solid housing demand will support sales in the coming quarters,” said Sherril Sheng, Research Director for JLL China Residential Sector. Primary prices are expected to stay largely stable in 2H22 as price caps remain in place. High-end secondary prices are likely to see mild growth in 2H22 as people's experiences in the outbreak have generated demand to upgrade to high-end residential compounds with better property management.

Capital Markets

Total transaction volume reached RMB 15.3 billion in the second quarter of 2022. As the outbreak is brought under control and recovery continues, the investment market is expected to get back on track,” said Sun Ling, Head of Capital Markets for JLL East China. Office assets accounted for 87% of 2Q22 transaction volume, primarily contributed by end-users. Leading enterprises in the energy and technology sectors were the driving force in the market as they sought high-quality core office properties. Such stabilized assets with solid rental income and cash flows were resilient despite the downward cycle. From an investment return perspective, this asset class has strong appreciation potential, attracting buyers to allocate funds towards assets that satisfy their criteria. Recent investment activities of this type reflect the city’s resilience as end-users continue to see Shanghai as a strong target market over the long term.

The recent outbreak has brought further attention to the rental housing market as consumers look to improve their living situations. Rental housing accounted for approximately 11% of 2Q22 transaction volumes, as institutional investors are optimistic about rental housing’s resilience through business cycles. In terms of the logistics sector, the Yangtze River Delta’s strong consumer market will continue to drive demand, and the logistics market is expected to remain strong over the long term. Logistics assets will continue to be sought after by investors, and as investment activity resumes, more logistics assets are expected to enter the investment market in the second half of the year.

Sun Ling remarked, “Even though COVID-related disruptions have brought uncertainty and new challenges to investors, opportunities remain abundant. We believe Shanghai will remain investors’ primary investment destination, and the market will see sustainable and solid growth in the long run.”

About JLL

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