News release

Shanghai office leasing activity resumes and home sales surge

According to JLL Shanghai 2020 Second Quarter Property Review

July 09, 2020

Shanghai, July 9, 2020 – As Shanghai eased measures to control the COVID-19 outbreak, business activity gradually returned to normal and consumer confidence began to rise. Eddie Ng, Managing Director for JLL East China, said “Combined efforts from government and firms allowed Shanghai’s real estate market to gradually recover. Office leasing resumed as the decentralized market saw more leasing and firms pursued cost-saving strategies. Residential sales rebounded strongly as supply surged and demand constrained by the outbreak was released.” Retail sales in Shanghai continued to recover, though leasing demand remained sluggish. Leasing in the logistics market was active, in particular from third-party logistics and parcel firms. Shanghai’s investment market continued to slow as investment volumes declined from the year before, though owner-occupiers continued to be active.

Grade A Office

Leasing activity picked up thanks to decentralised market activity, though a slow economy meant that cost-saving remained the main demand type. Decentralisation continued and renewal rates increased as tenants pursued conservative strategies. CBD net absorption was recorded at -2,600 sqm, while decentralized net absorption reached 86,000 sqm, with significant leasing in Qiantan submarket by firms with cost-saving and consolidation requirements. “Leasing activity resumed over the second quarter. While the market remains under pressure from the outbreak, demand from firms in the TMT, healthcare, and financial services industries has remained resilient,” said Anny Zhang, Head of Markets for JLL China.

As landlords tried to make up for construction delays caused by the outbreak, six new projects with a total GFA of 295,000 sqm completed in the decentralised market. Even as some projects made up for delays, though, others strategically pushed back opening to avoid fierce competition amid large supply pressure.

Rental declines accelerated as the outbreak's impact fed through to the second quarter, with CBD rents falling 2.6% q-o-q, and decentralised rents declining 3.8% q-o-q. Tenants remained conservative, while large supply and soft demand pushed landlords to offer more rental incentives such as longer rent free periods and customised fit-out services.

Business Parks

Overall demand remained stable as tech companies remained active. Three projects in Caohejing with a combined GFA of 206,000 sqm were completed in 2Q20 with relatively high commitment rates. Several sectors benefiting from “new infrastructure” initiatives, including 5G, AI, and integrated circuit industries, showed healthy demand in the business park market, particularly in Caohejing and Zhangjiang. Additionally, pharmaceutical companies stayed active in the market as the outbreak led to more concerns for healthcare. Landlords became more willing to negotiate on rental discounts and incentives amid increasing economic uncertainties and supply pressure from the office market. As a result, overall rents decreased 0.9% q-o-q to RMB 4.4 per sqm per day.


The decline in retail sales narrowed in the second quarter, but leasing demand remained soft. Landlords and retailers offered sales promotions and extended nighttime business hours to boost the retail market recovery. Multi-brand beauty shops bucked the downturn and actively expanded, while fast fashion retailers faced industry shuffle amid falling sales and overstock issues. “Prime market landlords increased shares of F&B tenants, especially Chinese light dining and casual beverage and dessert shops. Children's retail committed to new offline spaces, while expansion by children entertainment brands slowed,” said Ellen Wei, Head of Retail for JLL China.

No new supply was recorded in 2Q, and a department store in Hongkou exited the market. Sluggish leasing prolonged projects' deal negotiation cycles, leading to more deferred openings. More tenant adjustments in the prime market led to higher overall vacancy. Prime market vacancy rose from 9.3% to 12.5% q-o-q, primarily due to landlords' tenant adjustments and effects of the pandemic. Decentralised vacancy rose from 10.2% to 11.4% q-o-q. The smaller increase in decentralized vacancy was helped by community malls showing resilience due to inelastic nearby consumer demand and lower operating costs.

Prime open-market ground floor base rent dropped by 2.3% y-o-y to RMB 48.8 per sqm per day, while decentralised rents fell by 5.3% y-o-y to RMB 19.2. The more significant rental drop this quarter reflects challenges faced by landlords and retailers. Landlords grew more willing to negotiate rental concessions with certain creditable tenants, and retailers prefer shorter lease terms and more flexible leasing space to alleviate operating costs.


Overall leasing was active this quarter, with international and local 3PLs and parcel firms taking space. A pharmaceutical firm took significant space in Qingpu submarket, and although we did not record major leases from cold chain tenants this quarter, inquiry levels remained strong. The second quarter’s leasing was counterbalanced by vacancy in new completions as well as lease expirations in some projects. For example, a fashion retailer terminated a lease due to the effects of the coronavirus outbreak. As a result, net absorption fell back into slightly negative territory.

Two projects marked the first new supply in over a year, with Mapletree refurbishing a 36,000 sqm project in the PVG submarket, and Dragoncor completing its 71,775 sqm Songjiang Tianma project in Songjiang submarket. Vacancy rose 2.2 ppts to 7.5%, largely as a result of the quarter's new supply. “Rental growth was strongest in submarkets such as Jiading and the greater Jinqiao area in Pudong where demand was strong and vacancy was low,” said Richard Huang, Head of Supply Chain and Logistics Service for JLL China. This allowed overall rents to rise despite the uptick in vacancy.”


Home sales in Shanghai's primary market recovered as demand delayed by the outbreak was released, and large new supply provided more choices for homebuyers. Mass market sales in the primary market totalled 2.4 million sqm, up 153.1% q-o-q or 12.5% y-o-y. High-end sales grew 342.8% q-o-q and 148.4% y-o-y to reach 1,222 units, the highest quarterly level since 2016.

New supply surged in the mass market as projects that had faced delays due to the COVID-19 outbreak were able to launch, and as developers accelerated new launches to offset liquidity pressure. The high-end segment also saw a supply surge, with nine projects launching 1,602 units, the highest quarterly total since 3Q08. Under looser price caps, new projects obtained higher permitted prices, allowing average high-end primary prices to rise 0.3% to RMB 119,660 psm.

Over 2H2020, we expect the local government will continue to ease supply side policies such as increasing land sales, easing price caps for new launches and accelerating the approval process for pre-sale permits. Strict demand side policies are likely to remain, including HPRs and down payment requirements. We retain our forecast that sales momentum is likely to moderate in 2H2020, not only because much demand was released with the post-March supply surge, but also because demand-side policies remain strict and overall economic uncertainty persists. Primary prices may continue to increase at a mild pace due to looser price caps.

Capital Markets

Sentiment remained slow in Shanghai’s real estate investment market, with total transaction volumes reaching RMB 17.4 billion, down 40% y-o-y. The office sector remained the first choice for investors, with trading volume in the second quarter of RMB 13.5 billion, accounting for 77.7% of Shanghai’s total investment market transaction volume.

Owner-occupiers were relatively active. In the second quarter, Tishman Speyer sold an office block in the Qiantan submarket for RMB 1.76 billion to Chinese beauty products company TST, whose background is in selling goods over WeChat. In addition, Bank of Shanghai has agreed to buy the T2 building in the Greenland Bund Centre, a complex south of Shanghai’s historic Bund riverfront, for RMB 4.9 billion. Owner-occupiers are expected to continue to be active over 2020.

Looking ahead to the rest of 2020, total transaction volumes are expected to fall below the RMB 100 billion level reached over the past four years. Investors will remain cautiously optimistic, with the office sector remaining the main target. We expect domestic investors, particularly insurance companies and self-use enterprises, to become the dominant force in the investment market,” said Jim Yip, Head of Capital Markets for JLL China & East China, said:

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, operations in over 80 countries and a global workforce of more than 94,000 as of March 31, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit