News release

Shanghai’s retail leasing improves; hotel industry sees continued recovery

According to JLL Shanghai 2023 Third Quarter Property Review and Outlook

October 12, 2023

Susan Yu

+86 6133 5797

Vickie Zheng

+86 6393 3333

Shanghai, October 12, 2023 – Shanghai’s commercial property market continued to recover at a moderate pace over 3Q23. “Retail rents grew for the first time since 2022, and this quarter we saw logistics absorption rebound,” said Anny Zhang, Managing Director for JLL East China and Senior Managing Director of China Leasing Business. Investment activity in Shanghai continued to improve as buyers embraced a wider range of asset types.

  • Office Market: Absorption remained positive but edged down from the previous quarter as tenants remained cautious.

  • Retail Market: Net absorption in Shanghai's urban area further increased amid continued improvement of retail leasing.

  • Logistics Market: Net take-up gradually improved; rental growth decelerated amid the quarter's continued supply wave.

  • Residential Market: New launches slowed and sales declined, though a relaxation in mortgage policies set the stage for improved homebuying sentiment going forward.

  • Investment Market: Shanghai's investment market saw twenty-eight transactions totalling RMB 14.4 billion in 3Q23.

  • Hotels Market: Shanghai's upscale hotel market rebounded with strong growth in domestic and international tourism.

Grade A Office

Net absorption edged down to 67,740 sqm as renewals and cost-saving drove demand. Takeup in the CBD reached 3,200 sqm, with Head of Project Leasing for JLL Shanghai Office Leasing Advisory Stanley Jiang commentingSmall-sized occupiers were quick to make leasing decisions while larger tenants favored renewals. Some firms took advantage of the tenant-favorable market to upgrade from Grade B offices.” Decentralized absorption reached 64,500 sqm. Performance varied by submarket, with projects that offered greater incentives capturing more cost-saving demand. We observed leasing from financial and professional services firms in high-quality projects along the Huangpu River this quarter.

Three projects totalling 154,000 sqm completed in the CBD. Slow pre-leasing in the new projects led CBD vacancy to increase 1.7 ppts q-o-q to 13.6%. The Pudong CBD saw vacancy rise 0.8% ppts to 11.5%, while vacancy in the Puxi CBD rose 2.4% ppts to 15.4%. In the decentralized market, three projects delivered 187,000 sqm. Amid slow leasing and continued large supply, vacancy increased 0.8 ppts q-o-q to 28.5%.

Overall rents fell amid cautious leasing and large supply. Rents in the CBD declined 1.2% q-o-q to RMB 8.9 per sqm per day. Pressure from new supply, ongoing decentralization, and slow demand have forced CBD landlords to adjust leasing strategies to attract and retain tenants. In the decentralized area, performance varied by submarket and some landlords showed greater willingness to adjust rents and provide incentives. A large future supply pipeline is adding to the market's pressures, contributing to a 1.8% q-o-q decline in decentralized rents to RMB 5.7 per sqm per day.

Business Parks

Shanghai’s business parks recorded 62,500 sqm of net absorption in 3Q23. Pre-commitments in new completions accounted for a majority of the quarter's take-up. According to Stephen Yu, Head of Business Park Services for JLL Shanghai Office Leasing Advisory, most tenants remained conservative in leasing, contributing to a rise in renewals. Companies from tech-oriented industries like integrated circuits maintained their leasing momentum, and headquarters demand grew more prominent. Two projects with a total GFA of 132,400 sqm reached completion. Shanghai’s overall business park vacancy rose 0.5 ppts q-o-q to 15.8%, and overall rents fell 0.4% q-o-q to RMB 4.5 per sqm per day amid the slow recovery and significant supply pressure.


Shanghai's retail leasing continued to improve over the third quarter. “Vacant spaces were backfilled, supported by more leasing activity and favorable rents,” said Neo Huang, Head of Retail Agency Leasing for JLL East China. Net absorption in Shanghai's urban area further increased to 320,000 sqm. The F&B sector remained active in offline expansion. We also observed stable demand from sportswear and sports equipment brands, skincare and perfume chains, jewellery and accessory brands and new energy vehicle (NEV) showrooms.

Four projects added a combined retail GFA of 251,000 sqm to the decentralized area in 3Q23. All four projects – Hongshoufang, Longhuahui, Dream Gala, and T Center – achieved occupancy rates over 80% on their grand opening dates. No new supply was competed in the prime area this quarter. Prime market vacancy fell 1.7 ppts q-o-q to 11.7% with more brands resuming expansion in core locations. Brands were cautious in committing to spaces in the decentralized market amid that area’s supply pressure, leading decentralized vacancy to edge down only 0.5 ppts q-o-q to 11.6%.

Prime ground floor rents grew 0.5% q-o-q to RMB 46.6 per sqm per day, the first quarter of positive growth since 2022. Decentralized rents further dropped as large supply kept competition intense, but the pace of decline decelerated 0.3 ppts, with rents down 1.0% q-o-q to RMB 17.0 per sqm per day.


Following a relatively quiet spring, Shanghai's logistics market improved over the third quarter with net absorption of 161,000 sqm. That said, take-up remained below its level of a year before, and the quarter's large new supply led vacancy to rise to 14.9%. “Vacancy diverged across submarkets as new supply arrived in different locations,” said Richard Huang, Senior Director of Logistics & Industrial for JLL China. Western submarkets like Qingpu and Songjiang saw elevated vacancy amid continued supply waves. 3PLs continued to lead demand, with a well-known logistics firm leasing more than 15,000 sqm in Songjiang.

Five projects totalling 293,000 sqm completed in 3Q23, with the majority (67% in terms of GFA) located in Songjiang submarket. Vailog, Metcold, Brookfield, and SF all delivered projects in Songjiang, boosting the submarket's total stock by nearly 20%. In addition, Metcold completed its 52,000 sqm Qingpu Liantang project this quarter. Shanghai's logistics supply is expected to exceed 1.0 million for 2023 as a whole, which would be the largest annual supply since 2021. We expect the bulk of supply to continue to be focused on certain submarkets, with Qingpu, Songjiang, and Jinshan feeling the most pressure.

The quarter's continued supply wave contributed to a further slowdown in rental growth. Gaps in rental performance across Shanghai widened as landlords in areas with large supply pressure became more flexible on rents. Overall rents rose 1.8% y-o-y on a like-for-like basis to RMB 1.58 per sqm per day.


Shanghai's primary mass-market home sales declined 26.9% q-o-q and 46.2% y-o-y to around 2.0 million sqm in 3Q23, as new launches slowed and homebuyers remained conservative. The authorities have relaxed mortgage policies to allow home buyers to enjoy preferential treatment for first-home purchases regardless of their previous credit records. In the high-end segment, homebuying sentiment also moderated as more upgraders re-adopted “wait-and-see” attitudes. Coupled with limited new launches over the quarter, only 385 high-end units were registered as sold.

Developers delayed new launches in anticipation of further relaxation of policy, leading to around 2.4 million sqm of new supply being launched, down 14.2% q-o-q and 33.7% y-o-y. The supply of new high-end projects declined sharply this quarter. Only one new high-end project launched 308 units for pre-sale, down 77.8% q-o-q and 60.8% y-o-y.

Average primary prices stayed largely stable at RMB 132,900 per sqm. Meanwhile, homebuyers' confidence in the secondary market picked up slightly, in line with the relaxation in mortgage policies. The decline in average secondary prices narrowed from 0.9% q-o-q in the previous quarter to a decrease of 0.4% q-o-q in 3Q23.

“We expect the recent relaxation in mortgage policies to help homebuyers regain some confidence,” said Sherril Sheng, Research Director for JLL China Residential Sector. She continued: “However, as the policy adjustment was relatively minor, we expect overall homebuying momentum to pick up only modestly, and at a gradual pace.” Primary prices will continue to edge up in the near term as price caps are held loose. In the secondary market, relaxed mortgage policies might spur a degree of recovery in home transaction volumes. As a result, secondary prices may gradually stabilize in the next few quarters.

Capital Markets

Shanghai's investment market saw twenty-eight transactions totalling RMB 14.4 billion in 3Q23, up 38.9% from the second quarter and up 6.1% from the same period in 2022. Transaction volumes showed signs of recovering following a dip in 2Q23. Investors considered a more diverse range of assets, with retail deals receiving attention alongside popular sectors like offices, industrial properties, rental apartments, and business parks. There were four retail transactions in the quarter, accounting for approximately 28% of overall transaction volume. Following the revival of China’s tourism business, two hotel transactions were recorded this quarter, totalling 12% of total deal volume. Office deals accounted for 19% of total deal volume and industrial assets were 17%, while rental apartments were 14% and business park deals made up 9%.

Although self-user buyers dominated office investments in the first half of 2023, one out of eight office transactions this quarter was for investment purposes. This reflects growing interest in distressed assets during the current domestic economic cycle. Deals for such assets acquired through judicial auctions totalled RMB 2.1 billion, or 14.5% of the quarter’s overall transaction volume.

Approximately 91% of all transactions were by domestic investors. In addition to traditional insurance and financial institutions, some local governments and private buyers also entered the market. Institutions buying for investment (as opposed to self-use) accounted for 64% of deal volume, reflecting ongoing changes in Chinese real estate and demonstrating long-term confidence and optimism in the country’s property market.

Head of JLL Capital Markets East China Ling Sun remarked, "Shanghai continues to be the most appealing spot in China for real estate investments. Middle Eastern investors are opening offices in China, demonstrating their upbeat outlook on China's fundamentals and long-term prospects. We expect the investment market to continue rising and see further improved performance next quarter.”


The domestic tourism market continues to recover, and international tourism arrivals maintain a fast-growing trend, helping the full recovery of Shanghai’s upscale hotel market. The latest data shows that from January to August 2023, there were approximately 2 million international visitors with a y-o-y increase of 422%, recovering to 33% of the same period in 2019. After three years of the pandemic, the Shanghai Tourism Festival resumed to offline hosting with great expectations. During the Festival, Shanghai hosted 38.5 million tourists and achieved total tourism revenue of RMB 88.66 billion with a y-o-y increase of 13.5%.

As of YTD August 2023, Shanghai’s upscale hotel market registered an occupancy of 66% and an ADR of RMB 1,031, with a y-o-y growth of 73.4% and 28.9%, respectively. The resultant RevPAR of RMB 684 recorded a y-o-y growth of 123.6%. Compared to the same period in 2019, Shanghai’s upscale hotel trading performance has recovered by over 90%.

The 143-room Kimpton Bund Shanghai opened on August 28th. Due to project delays, an additional 612 rooms are anticipated to open throughout the remainder of 2023. Both Alila Shanghai (188 rooms) and Sofitel on the North Bund (384 rooms) have experienced delays, but Sofitel is projected to open in February 2024.

According to Junya Wei, Vice President of Hotels and Hospitality Group for JLL Greater China, “The strong demand of domestic and international leisure and business travel stimulates the full recovery of hotel market by an increasing quarterly growth rate in 2023. In addition, the return of MICE demand will further promote hotel trading performance in Shanghai during Q42023.”

About JLL

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