News release

China's rental housing market enters “lift-off phase”

JLL releases its latest China rental housing research – Gathering Momentum, Moving Toward Brightness

September 19, 2023

Shanghai, Sep 19, 2023 – While the government is implementing the New Urbanization Strategy, rental housing in China plays a crucial role in the housing market, offering a growing number of urban residents high-quality, convenient, and affordable housing options. After publishing Opportunity knocks: The Rise of China's Rental Housing Market in 2018 and New Journey: Onwards and Upwards - China Rental Housing Whitepaper in 2021, respectively, JLL has recently released its third publication on this sector titled “Gathering Momentum, Moving Toward Brightness". This publication aims to analyze the present scenario, examine potential future trends, and explore emerging opportunities in the rental housing market.

“Last year, China’s Housing Ministry proposed to speed up the development of the rental housing market. In February of this year, People's Bank of China and the China Banking and Insurance Regulatory Commission released a policy document on financial support for the development of the housing rental market and requested for public comments. It is obvious that the government is attempting to accelerate the supply and development of rental dwellings.” says Daniel Yao, Head of Research, JLL China. “We previously described the four phases of the rental housing market in China, which are the introductory phase, growth phase, lift-off phase, and mature phase. Considering the progress witnessed in the market, we believe that China's rental housing market has entered the new stage of lift-off phase."

Four major drivers laid solid foundations while young tenants generated demand for small units.

The whitepaper identifies four major drivers that continue to support the growth of China's rental housing market: favorable demographics, rising barriers to home ownership, supportive policies, and a shift in the attitude of the younger generation. The average occupancy rates of rental housing units in Shanghai, Beijing, and Shenzhen stood at 89%, 93%, and 96%, respectively, in the first half of 2023. Furthermore, rents have stabilized and recovered, demonstrating that despite the pandemic's impacts, the robust demand for rental housing has exhibited remarkable resilience and a non-cyclical in nature.

In addition, based on the results of its Rental Housing Operator Survey in 2023, JLL has identified several market trends. In terms of consumer demographics, tenants between the ages of 20 and 29 make up the majority of the population. The demand for small units has sharply increased driven by younger consumers. Although professionals continue to make up the majority of consumers, demand from college students and freelancers is also rapidly rising. Secondly, regarding client preferences, the primary factors that renters consider when making decisions are the location and accessibility to transportation. In addition, apartments with affordable rent and high quality are more attractive. From the perspective of lease terms, renters are seeking flexibility in the duration of their leases. This is driven by the fact that young individuals often change jobs and the economic landscape is increasingly marked by uncertainty. Approximately 42% of the operators reported that tenants in their operating projects generally opt for lease terms ranging from six months to one year. Finally, in terms of client acquisition strategies, many firms have recognized self-owned marketing channels as a vital means to enhance sales and reduce expenses. Tenants are more likely to sign lease agreements through official websites, Apps, and mini-apps (54%), compared to third-party platforms (34%), and traditional leasing agents (12%). However, the current percentage of renters sourced from B2B channels stands at only 16%, indicating significant room for expansion and growth in this area.

Over 90% of investors are planning to increase exposure to rental housing sector, building strong operation platforms emerged as a new trend among investors.

Strong demand fundamentals, stable return profile and improving market liquidity rank amongst the top pull factors for China's rental housing market. More than 90% of investors are planning to increase their exposure in the rental housing sector within the next three years, according to the survey conducted by JLL. With 95% of investors opting for conversion opportunities, asset-heavy approach remain as the primary investment strategy for investors. In the meantime, investors are also starting to consider investing in rental housing operation platforms and lease opportunities. To assure quality of products and services, 62% of investors opt to appoint established third party operators to manage their projects. Nevertheless, survey findings also indicate that 55% of investors are planning to utilize their internal resources to build a new operating platform, while 29% of investors are considering developing their own branding backed by third party operators, suggesting that building a strong brand presence has now become a new trend among investors.

Compared to results of the survey conducted in 2021, there is an increasing level of acceptance among investors towards co-investment, as they hope to leverage on local operators’ know-how and institutional investors' deal-sourcing ability. This is especially true as many institutional investors are exploring the possibility to team up with state-owned enterprises or government-backed investment platforms in order to gain access to rental housing (R4) land development opportunities. Furthermore, more than half (53%) of investors, such as newly-emerged high-net-worth individuals and family offices who are attracted to the consistent returns offered by rental housing projects, prefer independent investment. Value-add and opportunistic investment strategies remain popular but there is an increasing level of interest observed for core and core plus opportunities as the market starts to welcome more diverse types of investors. As for return on investment, the majority of investment institutions expect stabilized yield on cost ranging from 4.5% to 5.5%, and 51% of investors expect further cap rate compression of rental housing projects up to 50 basis points over the next five years, implying further asset value enhancement potential.

The growing importance of developing asset management capabilities for rental housing

Evolving from the rapid expansion phase towards a long-term steady growth, China's rental housing sector has entered into a new phase focusing on high-quality development. Developing strong asset management capabilities to drive cost reduction and operational excellency has become the key to success in a growingly competitive market.

The whitepaper further points out that, market players need to acquire in-depth market knowledge which will enable effective deal-sourcing and deal-assessment capabilities. In addition, investors also need to develop a comprehensive space planning and design skill set in order to achieve desired investment return for conversion opportunities. More importantly, investors and operators both need to focus on developing brand loyalty and powerful sales channels to drive significant savings in sales and marketing expenses. Last but not the least, the ability to create and constantly update product offerings to cater to the diverse range of needs from the ever evolving tenant population is a vital factor for success for investors.

"In China, the rental housing industry is undergoing a significant transformation towards refinement, standardization and sophistication. During the “lift-off phase”, market participants need to focus on enhancing asset management capabilities and exploring untapped market opportunities, and taking a collaborative approach to achieve long-term growth and success” says Eric Pang, Head of Capital Markets, JLL China.

This link provides download access to the English version of the whitepaper.

About JLL

For over 200 years, JLL (NYSE: JLL), a leading global commercial real estate and investment management company, has helped clients buy, build, occupy, manage and invest in a variety of commercial, industrial, hotel, residential and retail properties. A Fortune 500® company with annual revenue of $20.8 billion and operations in over 80 countries around the world, our more than 106,000 employees bring the power of a global platform combined with local expertise. Driven by our purpose to shape the future of real estate for a better world, we help our clients, people and communities SEE A BRIGHTER WAYSM. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit