In 1Q25, the Shanghai business park market’s net absorption recorded 67,800 sqm. Overall, tenants continued to adopt cautious leasing strategies. According to Stephen Yu, Head of Business Park Services for JLL Shanghai Office Leasing Advisory, “Cost-driven relocations and upgrades remained the primary source of demand. Integrated circuits, artificial intelligence, and life sciences are engines of industrial transformation, with their leasing demand remaining robust. Additionally, demand from headquarters-based corporations and government-backed industrial incubators and research institutions is also active.”

The completion of four projects this quarter delivered a total GFA of 420,600 sqm. The large new supply pushed up the overall vacancy rate by 2.3 ppts q-o-q and 3.3 ppts y-o-y to 23.1%. The overall market rents continued to face downward pressure, influenced by tenants’ cautious sentiments and the large supply influx in the short term. Overall rents declined by 2.4% q-o-q and 11.5% y-o-y to RMB 3.9 per sqm per day.

Leasing activities remained subdued in 1Q25, as brands across various sectors remained conservative towards expansions and renewals. Despite the cautious market sentiment, several sectors maintained stable leasing momentum in 1Q25, supported by consumption stimulus policies and consumers' focus on healthy lifestyles, entertainment, and value for money. According to Neo Huang, Head of Office Leasing Advisory for Shanghai and Head of Retail for East China, JLL, “Key growth sectors including sportswear, collectible toys, pet services, VR experiences, and affordable dining, are continue to gain momentum.”

No new supply was recorded in the Shanghai urban area this quarter. Intense competition, coupled with cautious leasing momentum, continues to put the market under pressure. Prime market vacancy rose 0.8 ppts to 9.9% and decentralised market vacancy rose 0.7 ppts to 13.8%. In response to heightened competition, many landlords proactively implement changes through repositioning, renovations, and brand-mix adjustments to enhance asset performance.

Rental decline continued in 1Q25, reflecting cautious market sentiment. Average ground floor rents in the prime areas decreased by 1.4% q-o-q to RMB 43.5 per sqm per day, while decentralised areas fell by 1.6% q-o-q to RMB 15.2 per sqm per day.

Looking ahead, China's focus on boosting consumption in 2025 will involve a combination of policy support. Sectors including sportswear, entertainment, collectible toys, smart home appliances, and 3C electronics are expected to drive active store expansion in 2025.

The slowdown in project launches caused a 34.5% q-o-q decline in Shanghai's primary home sales volume, totalling 1.49 million sqm in 1Q25. Pre-sale performances varied greatly among new projects, with high-quality ones in prime locations retaining solid demand. Buying demand for high-end projects remained robust this quarter. However, a decrease in new high-end project launches led to a 46.3% q-o-q fall in high-end sales volume in 1Q25, with 1040 units registered as sold.

New home supply declined sharply this quarter due to the Chinese New Year Holiday in January and developers' slowdown in project launches in February. This quarter's new home supply totalled 0.78 million sqm, marking an 62.3% q-o-q decline. The pace of new high-end project launches slowed in 1Q25, with only four high-end projects totalling 635 units launched for sale, a 65.9% q-o-q decline. The average prices of the four new high-end projects ranged between RMB 143,000 per sqm and RMB 189,000 per sqm.

Shanghai’s average high-end primary price edged up 0.5% q-o-q to RMB 144,600 per sqm in 1Q25. Meanwhile, continued recovery in high-end secondary sales led the average secondary price to see a narrower decline, down 1.6% q-o-q to RMB 135,500 per sqm. “Looser credit conditions combined with Shanghai's loose stance on housing policies are expected to help sustain the ongoing recovery of homebuying sentiment in both primary and secondary home sales markets,” said Sherril Sheng, Research Director for JLL China Residential Sector. High-end primary prices are expected to edge up further, while high-end secondary prices are likely to experience slower declines as homebuying demand for high-end secondary projects further recovers.

In the first quarter of 2025, Shanghai’s investment market delivered resilient performance, recording 24 en-bloc transactions with a total transaction volume of RMB 11.46 billion, marking a 20% quarter-on-quarter growth that underscores recovering momentum. Two key trends are prevailing within the market. First, small-scale project transactions remained the mainstream, with the average transaction size continuing to shrink. Transactions below RMB 500 million surged to a historic high of 74%. Second, high-net-worth individuals (HNWIs) and corporate buyers led the investment market, representing 67% of total transactions by transaction volume. Their agile investment strategies have played a positive role in revitalizing existing assets, enhancing market liquidity, and spurring market activity. Transactions for investment purpose continued to rise this quarter, accounting for 86% of total transactions by transaction volume.

In the first quarter of 2025, rental housing emerged as the most sought-after asset class, accounting for 34% of total transaction volume, surpassing office assets for the first time. Insurance institutions played a pivotal role in driving market activity as their interest in large-sized rental housing projects continued to rise. Office ranked second in terms of transaction volume (29%) this quarter, followed by Retail (27%), Hotel (5%), and Business Park (5%).

Ling Sun, Head of JLL Capital Markets East China stated, “The market is undergoing a significant transformation, compelling owners to act decisively to capitalize on emerging opportunities. Many successful transactions this quarter were driven by owners’ agility in adapting strategies to rapidly evolving market conditions. Looking ahead, we expect continued diversification and increased specialization across the investment landscape.”