Inspections and inquiries rebounded, while tenants kept conservative strategies, and leasing activities remained relatively slow. A majority of demand came from established firms, while cost-saving requirements continue to be a key type in leasing demand. “In the CBD, domestic financial service firms remained active in Pudong while luxury retailors and professional service firms were resilient in Puxi,” said Jacky Zhu, Senior Director of Office Leasing Advisory for JLL Shanghai. Decentralized net absorption was 59,300 sqm, driven by domestic financial services and life science firms. Cost-saving led some firms to relocate from the CBD to new high-quality projects in fringe areas.

In the CBD, LuOne delivered 45,900 sqm in Xintiandi. This project received strong pre-leasing, helping keep CBD vacancy relatively stable at 10.8%, up only 0.6 ppts q-o-q. Part of New Bund Square City in Qiantan delivered 33,100 sqm. Robust leasing in the new project combined with leasing recovery in other fringe submarkets to reduce decentralised vacancy by 0.4 ppts q-o-q to 24.1%.

The decline in CBD rents slowed, though rents still fell 0.1% q-o-q amid conservative sentiment. Some tenants took advantage of falling rents to negotiate more favorable terms. Rents in premium Grade A buildings withstood the trend to edge up slightly. Overall decentralized rents still fell 0.5% q-o-q, while some fringe areas and popular submarkets in decentralized Shanghai saw improved leasing demand. Large supply on the horizon put downward pressure on rental growth. Landlord confidence continued to be muted in projects and submarkets suffering from high vacancy.