News release

Shanghai property market shows signs of recovery

According to JLL Shanghai 2023 First Quarter Property Review

April 11, 2023

Vickie Zheng

+86 6393 3333

Shanghai, Apr 11, 2023 – In 1Q23, Shanghai’s commercial property market showed signs of recovery, with business activities in all sectors resuming normalcy. “Inquiries levels are rising and leasing activities is improving.” said Anny Zhang, Managing Director for JLL East China and Senior Managing Director of China Leasing Business, “with positive implications for Shanghai’s real estate market, we expect the recovery to gain momentum as the year progresses.”

  • Office Market: Inspections and inquiries increased significantly, and rental declines slowed as business activities showed signs of recovery.
  • Retail Market: Foot traffic rebounded, and we saw improving leasing from certain segments, notably F&B.
  • Logistics Market: Demand and leasing were stable, leading vacancy to decline despite the arrival of new supply.
  • Residential Market: Sales momentum improved while demand for high-end projects remained notably strong.
  • Investment Market: Shanghai’s investment activity has rebounded, and investors displayed an optimistic outlook.
  • Hotels Market: Border reopening boosts hotel industry recovery.
Grade A Office

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.

Business Parks

Leasing activity is gradually picking up with a significant increase in inspections. However, most tenants remained conservative in their leasing strategy, resulting in a slow leasing process. “Technology firms including integrated circuits and artificial intelligence, and high-end manufacturing firms such as new energy vehicles, showed active leasing demand,” said Stephen Yu, Head of Business Park Services for JLL Shanghai Office Leasing Advisory. In terms of new supply, one project reached completion in the first quarter and delivered a total GFA of 82,000 sqm, pushing the overall vacancy rate up slightly to 13.6%. Landlords adjusted expectations in line with tenants’ cautious leasing attitudes. Overall rents decreased slightly by 0.1% this quarter, remaining nearly flat at RMB 4.6 per sqm per day.


Shanghai's shopping malls saw an accelerating rebound in foot traffic over 1Q23, especially in F&B shops. Retail sales are undergoing a slow recovery, leaving brands cautious in expanding. Net absorption in overall market remained negative at -28,300 sqm in 1Q23. New leasing inquires mainly came from international skincare brands, sports & outdoor apparel and equipment, new energy vehicle (NEV) showrooms, and household goods and furniture brands. According to Neo Huang, Head of Retail Agency Leasing for JLL Shanghai, “The F&B recovery gave some fine dining and bakery chains confidence to expand, though brands remain selective about site selection.”

After approximately a year of renovation, two projects in the prime market reopened in 1Q23, adding a combined 35,000 sqm. Xintiandi Style II has been renovated into a destination for trendy and innovative designer brands, and Bailian ZX has been repositioned as an immersive space for ACGN (animation, comics, games, and novels) culture.

Retail performance further diverged between projects. Some projects faced more challenges, resulting in a slight increase in overall market vacancy. Prime market vacancy rose 0.2 ppts to 14.5%, while decentralized vacancy increased 0.1 ppts to 13.4%.

The slow recovery in retail sales weighed on tenants and landlords, and kept rents on a downward trend in 1Q23, though the pace of declines narrowed. Prime ground floor rents fell by 0.4% q-o-q on a chainlinked basis. Decentralized rents fell 0.9% q-o-q as some landlords offered concessions to retain tenants.


Stable leasing led to 87,000 sqm of net absorption which saw some improvements comparing to the same period last year. While there was some new supply, stable demand in both existing and new projects allowed non-bonded vacancy to edge down slightly to 9.4%. “E-commerce firms and retailers were active in leasing,” said Richard Huang, Senior Director of Logistics & Industrial for JLL China. For example, a well-known e-commerce platform leased approximately 36,000 sqm in Songjiang submarket, and a retailer leased more than 4,000 sqm in Fengxian submarket.

Logiport Songjiang Logistics Park was the quarter's only completion. The project delivered 76,000 sqm of modern warehouse space and reached market with a decent pre-commitment rate. The supply pipeline for 2023 remains significant. Five projects totalling 582,000 sqm are expected to come online in the remainder of 2023, which will put submarkets like Qingpu and Songjiang under short-term pressure in terms of vacancy and rental growth.

Rents continued rising on the back of stable demand. Rents grew slightly slower by 0.41% q-o-q on a like-for-like basis to RMB 1.58 per sqm per day.


Mass market primary sales volume declined 4.2% q-o-q and 4.7% y-o-y to about 2.5 million sqm in 1Q23 as a result of the quarter's decline in new project launches. Nevertheless, Shanghai's sales momentum slightly improved as 47% of newly launched projects overperformed in terms of pre-commitment rates, up from 36% in 4Q22. Sales performance continued to diverge between high-end and mass-market projects in this quarter, with demand for high-end projects remaining strong. That said, the quarter's limited new high-end supply meant that high-end sales declined 33.0% q-o-q to 703 units.

Affected by the Spring Festival holiday in January and a slowdown in new project launches in early February, in this quarter only about 1.8 million sqm launched to Shanghai's housing market, down 56.3% q-o-q and 33.7% y-o-y. In the high-end segment, two projects supplied 209 units to the market in 1Q23.

Primary prices increased by 0.7% q-o-q to RMB 132,500 per sqm, with price caps remaining relatively loose. Meanwhile, limited new supply led many homebuyers to return to the secondary market, leading secondary prices to recover 0.2% q-o-q to RMB 107,200 per sqm, up from a 1.6% drop last quarter. High-end leasing activity saw a modest recovery driven by improving demand from non-local tenants returning to Shanghai, as well as resilient leasing demand from local upgraders. This helped average rents to rebound, rising 0.2% q-o-q following a 1.1% drop last quarter. Average rents ended the quarter at RMB 173.5 per sqm per month.

According to Sherril Sheng, Research Director for JLL China Residential Sector, “High-end supply is expected to remain substantial over 2023. Underpinned by solid upgrade demand, high-end residential sales are anticipated to continuously gain momentum throughout the year.” Primary prices will likely increase further, as loose price caps are expected to remain in place over the short term. On the other hand, following the gradual recovery of home sales in the secondary market, secondary prices are likely to recover further in the second half of 2023.

Capital Markets

Shanghai’s total transaction volume for 1Q23 reached RMB 24.76 billion, an increase of 0.65% compared to the same period last year. Investment activities continued its pace of recovery following a strong showing in the last quarter of 2022. Investors were displaying an optimistic outlook for Shanghai’s investment market.

In the first quarter, 80% of the transaction completed this quarter were from institutional investors, an upsurge compared to last year's 40%. Business parks and multi-family assets remained the sought-after assets for institutional investors. This quarter saw two large-scale Business Park transactions with values over RMB 5 billion, pushing business park transactions to 72.4% of total volume. In addition, 23% of all the deals in 1Q23 are rental apartments, though the transacted volume is limited due to the relatively small deal size for each asset.

End-Users remain as the key buyers of office assets mainly for headquarters. All the four office assets transacted in the first quarter were sold to end-users. Self-use buyers show diverse profile, spanning various provisional or city-level SOEs, NGOs, and private enterprises etc.

Head of JLL Capital Markets East China Ling Sun remarked, “China continued to support the property sector through the introduction of various supportive policies. Such policies, including pilot scheme of private equity into real estate and expanding C-REITs asset types, extend financing channels in real estate market. in the meantime, these measures also help the investment market gain momentum, and restore investor confidence in the China market.”


In the first quarter of 2023, the border reopening drove a dual positive effect on tourism arrivals and hotel performance. A total of 176,700 international visitors arrived in Shanghai in February, an increase of 26.3% over 2022 Feb. Revenue per available room (RevPAR) increased rapidly by 21.6% to RMB482 for YTD February 2023 compared same period last year, mainly attributable to the recovery in occupancy. Occupancy increased by 18.9 percentage points to 51.5%, while average daily room rates (ADR) increased by 2.3% to RMB 937. Demand for leisure travel during the Chinese New Year holiday and the "Romance Economy" of Valentine's Day stimulated the upscale and luxury hotels’ performance. As a result, RevPAR has recovered to 82% in compared to YTD Feb 2019, with occupancy recovering to 86% and ADR recovering to 95%.

Shanghai West Coast MGM Hotel (219 rooms) opened on 23 February 2023. The hotel fills the long-standing vacancy of upscale and luxury hotels in the Xuhui Bund Area. A total of 3,696 rooms will enter the market in the next 3 quarters. Many conversions will also be unveiled, including the 188-room Alila Hotel (from Four Seasons), and the 384-room Sofitel on the North Bund (from Jiulong Hotel, an independent branded one). Some other notable openings are 157-room Kimpton Qiantan, 239-room Hyatt Centric and 254-room Caption by Hyatt in Zhongshan Park.

Under the impact of market macroeconomic factors, investors in the domestic hotel investment market are holding cautious investment strategies and price expectations between buyers and sellers are returning to rationality. With the lifting of travel restrictions, demand for domestic and inbound leisure and business travel has rebounded significantly, and the outlook and resilience of the domestic urban and resort city hotel market will rekindle investor confidence, and 2023 may see a number of high-quality hotel asset transactions.

According to Tao Zhou, Managing Director of Hotels and Hospitality Group for JLL Greater China, “The resumption of visa to China policy will have a positive impact on tourism and hotel industry. International exchanges between Shanghai and other foreign demand source markets have taken place already, and such activities will become more active. Business activities come first, then tourism activities will follow shortly.”

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