News release

Retail sector occupancy improves

According to JLL Shanghai 2020 Fourth Quarter Property Review

January 12, 2021

Shanghai, 12 January 2021 - Shanghai’s real estate market performance continued to improve as the pandemic receded. “Demand in the office market saw some rebound in the second half of the year, especially in certain decentralized submarkets that attracted many firms with cost-saving demand or large requirements for headquarters space,” said Anny Zhang, Managing Director for JLL East China and Head of Markets for JLL China. “Continued improvement in regional planning and building quality, combined with competitive rents, provided many firms with opportunities to upgrade their office environments.” 

Retail vacancy edged down in the fourth quarter as health-oriented brands, auto showrooms, and beauty stores further boosted demand. The logistics sector maintained positive rental growth for the year, benefiting from resilient demand and emerging drivers like cold chain and fresh food e-commerce. The residential market ended the year on a strong note with robust sales in the mass market and high-end segments. Shanghai’s investment volumes were down for the year, though slowing activity from foreign investors was balanced somewhat by strong local demand.

Grade A Office

As the negative impacts of the pandemic continued to subside, demand in Shanghai rose accordingly, with overall net absorption reaching 214,000 in 4Q20, and 407,000 sqm for 2020 overall. Annual net absorption in the decentralized market alone reached 397,000 sqm, benefitting from headquarter requirements and companies' continued focus on saving costs. CBD net absorption recovered further in 4Q20 to 25,000 sqm. “Domestic financial services and professional services companies took advantage of rental declines to upgrade their CBD offices from Grade B to Grade A,” said Neo Huang, Senior Director of Markets for JLL Shanghai. Besides these resilient industries, TMT and healthcare also remained active in 2020.

Three new projects added 137,000 sqm to the Shanghai office market in 4Q20. Supply for the full year reached 891,000 sqm, as construction resumed quickly following delays caused by the pandemic. CBD vacancy rose 2.0 ppts y-o-y to 12%, mainly due to new supply in Changning submarket. New supply also pushed decentralized vacancy rates to a peak of 31% in 3Q20 before falling back down to 29.6% in 4Q20 on the back of strong cost-savings demand, and ending 2020 up only 2.2 ppts for the year despite the pandemic and large new supply.

CBD rents fell 1.3% q-o-q and 6.7% y-o-y as new supply pressures pushed landlords to remain open to flexible commercial terms and additional incentives. Decentralized rents fell 0.9% q-o-q and were down 9.3% y-o-y, though rents in submarkets with strong momentum such as Qiantan began to increase in 2H20. 

Demand will continue to improve as the pandemic comes under further control and the economy recovers, with firms pursuing cost-saving opportunities remaining the key drivers of leasing demand. Lingering business impacts from the pandemic will lead businesses to remain cost-sensitive, which combined with plentiful supply may lead rents to decrease further in 2021. The leasing recovery is likely to be driven by industries that benefitted from the pandemic or are supported by key policy initiatives, including TMT, financial services, healthcare, and foreign financial companies.

Business Parks

Stable demand led rents to return to positive growth. With no new completions in the last quarter of 2020, the overall vacancy rate for Shanghai’s business parks declined to 12.5%, supported by stable demand that allowed overall net absorption to reach 105,000 sqm. The TMT and pharmaceutical sectors were the main demand drivers, especially online platforms, gaming, and healthcare companies. For example, Century Game leased 4,000 sqm in Caohejing Centre, and Bluesail Medical expanded by another 2,100 sqm in Atlatl in Zhangjiang submarket. Overall rents edged up, rising 0.8% q-o-q to RMB 4.4 per sqm per day, while they were still down 2.2% for the year as a whole. 


Urban net take-up accelerated to 139,100 sqm in 4Q thanks to the continued recovery in domestic consumption. Tenant upgrades to bring in more influential and trendy brands helped offline retail recover as 2020 went on. Outdoor sports, yoga, and running shoes brands all expanded actively. The beauty, automobile, and designer toy sectors also maintained strong leasing momentum over the year, while high-end fashion outperformed fast fashion brands.

Xintiandi Style I reopened with a preleasing rate over 95%, while two decentralized community malls opened with a combined retail GFA of 170,000 sqm. Full-year new supply reached a ten-year low of only 243,000 sqm after over 60% of planned projects ended up delayed out of 2020. Prime vacancy fell further from 11.8% to 11.0% in 4Q20 amid smooth pre-leasing for new openings and tenant adjustment in existing malls. Decentralized vacancy edged down from 11.6% to 11.4% as projects upgraded F&B and children-education tenants.

Prime ground floor rents edged up by 0.4% q-o-q to RMB 48.6 per sqm per day. Decentralized ground floor rents fell to RMB 18.6, with the decline narrowing to 1.0% q-o-q from 1.9% in the third quarter. Prime rents were down 1.6% for the full year while decentralized rents fell 6.8%. 

“Domestic consumption will play a larger role in China's economic recovery, with greater consumer spending further strengthening brands' confidence to accelerate expansion in 2021,” said Ellen Wei, Head of Retail for JLL China. “Brands likely to expand include beauty, activewear, domestic fashion brands, auto showrooms, lifestyle speciality stores, and light meal shops. Large future supply and slow leasing in new projects will put additional pressure on the decentralized market, while the prime market will fare better with limited new supply and active leasing.”


Absorption for 2020 reached 264,986 sqm, up substantially from supply-constrained 2019. “Demand for logistics space was relatively resilient during both the pandemic and ensuing recovery, as more consumers shopped online for household goods and fresh foods,” said Richard Huang, Head of Supply Chain and Logistics Service for JLL China. 3PLs were major drivers of demand in 4Q and throughout the year. Demand from retailers and manufacturers softened during the pandemic, though this has been partly compensated by leasing from emerging drivers such as cold chain operators. 

New completions for 2020 also rebounded from 2019, with total new supply reaching 384,471 sqm. Vacancy rose to 8.1% in 2020, though the increase was slight given year's larger supply and initial shock from the pandemic.

Rental growth continued to edge down to 0.2% q-o-q as most landlords remained focused on raising occupancy rather than pushing for higher rents. Rents for 2020 as a whole were up 2.4% y-o-y on a like-for-like basis, still positive but down from 6% the year before as landlords were cautious amid the pandemic.

Developers currently are planning to deliver over one million square meters of space in 2021, which would make it Shanghai's largest year for supply on record. Demand is expected to be strong as the economy recovers further and more strength from trends took off in the pandemic, such as greater online shopping and new prominence for fresh food e-commerce and cold chain. But vacancy may still feel upward pressure given the volume of new supply.


As sales momentum continued to improve, 2020 ended on a strong note with 4Q sales of 3 million sqm in the mass market. The full year 2020 recorded total home sales of 9.3 million sqm, up 21% y-o-y and the highest annual figure in the past four years. High-end demand remained strong, as new projects that were from high-profile developers or located in areas with good school districts attracted outstanding numbers of interested buyers. High-end sales reached 591 units in 4Q and 2,904 units for the full year, exceeding 2019 sales by 23% y-o-y.

Developers continued to accelerate new launches to achieve annual sales targets and ease cash flow pressure under increased financing regulations. New supply reached 2.4 million sqm in the mass market in 4Q20 and 7.8 million sqm for 2020 as a whole, up 1% y-o-y despite limited supply in 1Q20. In the high-end segment, three projects launched 690 units in 4Q20, and annual supply reached 2,942 units, up 45% y-o-y as more developers took advantage of loosened price caps to launch projects.

High-end projects that launched in 2020 obtained higher permitted prices under loosened price caps, pushing average primary prices up 0.5% q-o-q and 1.5% y-o-y to RMB 122,363 per sqm. In the wake of the "three red lines" regulations, developers' appetite for land acquisition moderated, with only one out of 13 residential-use land parcels sold during the quarter achieving premium rates higher than 20%.

With Shanghai taking further steps to attract talent - such as relaxing household registration policies for overseas graduates as well as targeting exceptional talents for areas like Zhangjiang and Lingang - JLL expects demand from first-time buyers to increase over the next few years. Sales and prices are also expected to see mild increases in 2021, given the current policy stance. Tight financing regulations are likely to push developers to accelerate new launches, and also will contribute to further moderation in land premium rates.

Capital Markets

Shanghai’s total commercial real estate transaction volume fell for the first time in the past 5 years, declining by 28% y-o-y to RMB 76.5 billion. Investment activities from once-active foreign players have been slowed by the pandemic and global travel restrictions. Foreign investors’ share of total transaction volumes fell from 45% in 2019 to 16% in 2020, with most transactions done by local players, particularly those with local self-use demand. In fact, self-use demand accounted for 67% of Shanghai’s total transaction volume over 2020. 

The office sector remained the first choice for investors. In particular, purchasers of self-use space helped office remain the most popular sector in the investment market even though the office leasing market remains under cyclical supply pressure. The office sector’s share of overall transaction volumes reached 82% in 2020, up from 59% in 2019.

“Looking ahead to 2021, we expect that the investment market’s recovery will depend on the strength of the economic rebound and stabilization in rental levels,” said Jim Yip, Head of Capital Markets for JLL East China. “Investors will be more selective in pursuing office sector assets as a result of cyclical pressure.” Business parks will attract investor attention as the TMT industry remains resilient and sees strong take-up demand. In addition, investors are expected to favor logistics and alternative asset classes such as data centers.

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 $18.0 billion in 2019, operations in over 80 countries and a global workforce of over 92,000 as of September 30, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit