Demand from local financial firms and others supported a five-year high in Grade A net absorption; New malls entered with different positioning diversifying the retail market

Tianjin, 11 January 2018 – "Although several office​ buildings were completed in 2017, the Tianjin market continued to absorb space and vacancy has posed less of a threat than some had feared" said Michael Hart, Managing Director of JLL Tianjin.

January 11, 2018

​​According to JLL Tianjin's 2017 Property Review and 2018 Outlook

Tianjin, 11 January 2018 – "Although several office​ buildings were completed in 2017, the Tianjin market continued to absorb space and vacancy has posed less of a threat than some had feared" said Michael Hart, Managing Director of JLL Tianjin. In 4Q17, in the retail sector, phase IV of Yanlord Riverside Plaza opened and put more pressure on the existing retail​ projects in Old Town submarket. Rebounded leasing demand in the logistics sector in the last quarter of year-2017 helped vacancy dropped significantly. Several new residential projects started pre-sale in the quarter, however, the high-end residential​ market continued to be stable with low sales volume and housing price under the restrictive policy environment.


Grade A office contributed 125,000 sqm net absorption in 2017, amounting to the highest Grade A's annual net absorption in the past five years; and helped the total net absorption, which stood at 189,000 sqm. For the whole market this was a decline of 34.8% y-o-y, but the new supply only accounted for a third of the past year's. Demand was dominated by domestic finance companies, especially non-banking financial institutions and insurance companies. For instance, Ping An Insurance picked up around 7,000 sqm in Yanlord Riverside Plaza, a Grade A project completed in 4Q16. Taiping Insurance leased 5,000 sqm in Cofco Plaza. Professional services, following the finance companies, drove the leasing demand, accounting for 15.0% of the annual transaction volume.

One Grade A project completed in 4Q17, Sino Ocean International Center, added about 53,000 sqm to the market. Therefore, two Grade A projects entered the market, adding 147,000 sqm of space in the whole of 2017, which brought total Grade A stock to around 971,000 sqm, an increase of 18.0% y-o-y. As there was strong demand in newly completed Grade A projects in 2H17, the Grade A vacancy saw a 4 percentage point decrease y-o-y by end-2017 to 48.3%. Only one Grade B project entered the market, adding around 40,000 sqm of space in the whole of 2017. Given that there was limited new supply and many newer, high-quality Grade B projects saw positive net-absorption in the year, Grade B vacancy declined 1.5 percentage points to 31.8%.

Net effective rents continued to decline, falling 2.0% y-o-y, to RMB 92 per sqm per month on a chain-linked basis at the end of 2017. Grade A rents fell 1.5% y-o-y to RMB 103 per sqm per month. Sustained high market vacant space in Grade A market caused landlords to continuously lower rental expectations to find tenants to absorb it. Grade B rents dropped 2.3% y-o-y to RMB 87 per sqm per month.

In 2018, 10 projects are expected to come online, which will add around 770,000 sqm and push the overall market stock to 3.6 million sqm and the vacancy to 43.0%. As a result of restrictions on winter commercial construction, some of the projects originally scheduled for completion in 1H18 would be delayed until 2H18. "Many new projects will complete outside the traditional submarkets, such as the Shuangying Plaza, the first completion in New Badali Area, which will provide more options for tenants who are looking to upgrade their office space outside the traditional business area," said Weiran Lv, Head of Markets JLL Tianjin.


Strong demand in the last quarter of this year helped annual net absorption in 2017 to stand at 262,000 sqm, which was still down 36.0% y-o-y. New leasing demand in the non-bonded market for the previous three quarters of the year were particularly slow. E-commerce and third-party logistics companies remained the most active in 2017, followed by retailers. Notable transactions were the logistics arm of a domestic e-commerce giant, which leased 120,000-sqm space across the city in 4Q17. Additionally, a domestic paper retailer leased around 50,000 in Wuqing to expand its presence in the year. Retailers and supporting logistics providers from Beijing were very active in seeking space in Beijing's surrounding areas such as Tianjin's Wuqing and Beichen. The Beijing government accelerated demolition of illegal structures across the city. The city was unable to accommodate this demand given the low vacancy and tight land supply.

Four non-bonded projects entered the market, adding 157,000 sqm of space in the whole of 2017, which pushed the total non-bonded market stock to 2.8 million sqm, a 5.9% increase y-o-y. The bonded logistics market remained quiet with 750,000 sqm stock. Overall non-bonded vacancy dropped to 14.8% by end-4Q17, down 4.8 percentage points y-o-y, as there were high commitment rates in all the new projects located at prime locations which entered the market in 2017 and existing projects supported by demand from 3PLs and relocated tenants from Beijing.

As the overall market vacancy rate declined and demand rebounded significantly in 4Q17, net effective rents in the non-bonded market rose 2.3% y-o-y on chain-linked base by end-2017 to RMB 0.93 per sqm per day.

Looking forward, E-commerce, 3PLs and retailers, followed by the spill-over demand from Beijing, will remain the major market drivers in 2018. "E-commerce giants and retailers will continue to set up city and regional distribution centres in Tianjin in 2018 with the continuously increasing domestic consumption," noted William Gao, Head of Industrial for JLL Tianjin. Eight developers plan to expand their market share, and totalling 650,000 sqm new supply are scheduled for completion throughout the city in 2018, amounting to the highest annual new supply level in the past two years. While leasing demand will be strong, a large amount of new supply will push the vacancy rate up by 4.3 percentage points y-o-y to 19.1% by end-2018. Overall market rents should still see room for increases given the tight vacancy environment in the northern submarkets of Tianjin, such as Wuqing, Beichen and Ninghe.


Despite the decrease in new retail supply, leasing demand in 2017 remained robust, resulting in the whole year's net absorption reaching 390,000 sqm, lower by only 5.0% y-o-y. Most demand continued to come from the F&B, child-related and service sectors. For example, Super Boom Burger leased 400 sqm in Heping Joy City, Tomato Art School opened a 500-sqm store in R&F Square and Xueersi School continued to expand in most community malls. "The tenant mix of shopping malls was becoming more diverse and more cultural elements were appearing in retail projects" said Sunny Yin, Head of Retail JLL Tianjin. Several bookstores combined with cafés or handicraft stores in shopping malls during the year and attracted shoppers to stay longer, for example Guangzhou Book Centre, Jade Way Space and Sisyphe Bookstore.

By end-2017, two new malls and a new phase of an existing mall had entered the market, adding 309,000 sqm of space. A total of 71.0% of this was in core submarkets, including TeeMall in Heping Road and Yanlord Riverside Plaza Phase IV in Old Town. Another mall, Global Mall Tianjin, was located on the city fringe, catering to daily shopping demand by residents and office workers nearby. All three malls entered next to existing projects, which increased the competitive environment in the market. The new completions saw a decline of 35.3% y-o-y compared to last year, this combined with the robust demand, pushed the vacancy rate down to 11.6%, a decrease of a 0.7 percentage point q-o-q and 3.2 percentage points y-o-y.

Strong leasing demand drove net-effective rents up to RMB 11.7 per sqm per day, an increase of 0.9% q-o-q and 2.6% y-o-y. Benefitting from good locations, easy access and active tenant adjustment by landlords, most shopping malls in core submarkets performed well with falling vacancy rates and rising foot traffic. These were the main drivers of the rental increases. Adding categories that could afford to pay higher rents, such as fashion and beauty retailers in mature malls, including Aqua City and Tianjin Joy City, were other reasons for the rental increases.

Looking forward, five new projects are expected to enter the market in 2018, including two large malls, Luneng CC Plaza and L+Mall, together with another three community malls with different features. We forecast that future leasing demand and new supply will increase at the same pace, which will keep the vacancy rate on a downward trend. Also, rents should grow at a stable pace due to the increasing competition in both core and non-core submarkets. 

High-end Residential

The whole 2017 residential market was largely impacted by the housing curb policies. The restriction for purchasing a second house for non-local people and a third house for local families took effect in 2Q17. This, combined with several banks that stopped offering discounts on mortgage rates, pushed transaction volume down to a 10-year low. High-end residential market sales volume stood at 809 units in 4Q17, an increase of 33.3% and a large drop of 65.4% y-o-y. Total transaction volume in 2017 saw 65.4% decline y-o-y.

A total of 1,540 new units were launched in the quarter, an increase of 126.5% q-o-q and a decrease of 22.4% y-o-y. Notable projects include Jinmao Palace in Haihe Riverside submarket and City Impression developed by Gemdale in Water Park submarket. Jinmao Palace, a new project with a nice river view and easy accessibility to the subway line launched 276 units at a high average price of RMB 51,880 per sqm. Inventory levels by end-2017 in the overall high-end market saw a mild increase at 11.8% y-o-y.

High-end housing price continued to rise at 7.6% y-o-y by end-2017 despite the housing curb policy, mainly because of the limited new supply and tight inventory level.

We forecast that the housing policy will remain tight during 2018, which is expected to help the housing market remain stable in terms of price and sales volume. "However, hot land market showed the developers' confidence on investing in Tianjin due to the local upgrading demand to continue to be solid," noted by Chelsea Cai, Head of Research for JLL Tianjin. The leasing market is expected to supported by the government but the impact may only be seen in the long run.

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JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2017, JLL had revenue of $7.9 billion and fee revenue of $6.7 billion; managed 4.6 billion square feet, or 423 million square meters; and completed investment sales, acquisitions and finance transactions of approximately $170 billion. At the end of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of 82,000.  As of December 31, 2017, LaSalle had $58.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit

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