News release

Vacancy falls across most market segments as demand remains strong

According to JLL Shanghai 2021 Third Quarter Property Review

October 14, 2021

Anny Zhang

+86 (21) 6133 5427

Daniel Yao

+86 (21) 6133 5416

Vickie Zheng

+86 (21) 6393 3333

Shanghai, October 14, 2021 – The recovery in Shanghai’s commercial property market continued to build momentum this quarter. “Leasing continued to rebound in the office market, specifically with robust demand leading to a decline in the vacancy rate of core CBDs. And we continued to see strong performance in submarkets like Qiantan, which benefited from leasing demand of firms in pharmaceutical and other industries.” said Anny Zhang, Managing Director for JLL East China and Head of Office Leasing Advisory for JLL China. Vacancy rate fell across Shanghai’s retail market as new supply was outweighed by continued strong demand from various brands, including luxury players. Logistics rental growth accelerated as demand from 3PLs, manufacturers, and emerging players remained robust. Demand in the residential market remained solid even as pandemic concerns led to a downturn in supply, helping lift high-end prices slightly. In the investment market, logistics, business parks, and multi-family sectors remained active, C-REITs have shown a viable exit strategy to institutional investors.

Grade A Office

The pace of recovery of the office market picked up in the third quarter, with overall absorption reaching 386,000 sqm and CBD net absorption rising to 174,000 sqm. Domestic financial service and professional service firms remained active in Lujiazui, while demand in Puxi was driven by sectors including financial services, professional services, retail, and TMT. Net absorption in the decentralised market reached 212,000 sqm, driven mainly by domestic firms. “TMT and financial services firms showed strong demand for expansion opportunities,” observed Neo Huang, Head of Tenant Representative for JLL Shanghai Office Leasing Advisory. “Meanwhile, inquiries from firms in the pharmaceutical industry also increased, especially in Qiantan submarket.”

One project reached completion in Changning CBD with a GFA of approximately 57,000 sqm. Despite the new supply, active leasing activity allowed the overall CBD vacancy rate to decline 1.7 ppts q-o-q to 9.3%. Vacancy rate in Puxi fell 1.8 ppts to 7.7% while that in Pudong fell 1.4 ppts to 11.2%. In the decentralised market, six projects with a total GFA of approximately 420,000 sqm reached completion. While demand was also active in these submarkets, the large amount of new supply pushed up the vacancy rate by 1.3 ppts q-o-q to 27.8%.

Overall CBD rents rose by 0.9% q-o-q. Rents in Puxi CBD up 1.8% were driven by increases in premium buildings, while Pudong CBD rents remained largely unchanged with widening performance gap between submarkets and individual buildings. Submarkets with strong performance such as Qiantan helped to raise the rents in the decentralised market by 1.3% q-o-q.

Business Parks

Net absorption reached 295,000 sqm, the highest quarterly total seen in recent years. TMT companies remained the main drivers of demand in Caohejing submarket, an example being a lease from Lilith Games for 17,000 sqm in SBP Phase 4 for its expansion. Zhangjiang submarket stayed active, with demand led by firms in the biomedical and TMT sectors. For example, Haihe Biopharma leased 6,000 sqm in Zhangjiang Nexxus Life Science Park, and OPPO expanded 7,000 sqm in Z+ Plus Park. In terms of supply, three projects with a total GFA of approximately 149,000 sqm reached completion in the third quarter. Despite the new supply, strong demand led Shanghai's overall business park vacancy rate to decrease by 1.9 ppts q-o-q to 11.6%. Overall rents continued to see slight increase, rising 1.0% q-o-q to RMB 4.5 per sqm per day. 


Overall net take-up went up to 524,600 sqm thanks to further leasing recovery and strong performance in new leading decentralised malls. “Luxury brands accelerated their expansion with a focus on flagship stores, new concept stores, and pop-up stores,” said Paige Chuang, Head of Retail Agency for JLL Shanghai. More high-end skincare, perfume, and make-up brands debuted their first stores in Shanghai. The quarter's improved leasing was also driven by auto showrooms, experiential indoor sports, chain restaurants, and coffee and dessert shops.

Three decentralised malls opened in Q3, adding a total retail GFA of 421,000 sqm. CapitaLand's Raffles City The Bund and Shui On's The Hall of the Sun opened in Hongkou District, both achieving high opening rates. Developed by Swire and Lujiazui Group, TaiKoo Li Qiantan launched at the quarter's end with a concentration of top luxury brands. Prime vacancy dipped 0.3 ppts q-o-q to 9.7% while decentralised vacancy rate fell 1.0 ppts to 9.3% as leasing recovery accelerated in existing malls and new projects debuted with high occupancy.

Prime ground floor rents grew 2.6% q-o-q to RMB 51.2 per sqm per day due to luxury brands' active expansion and exceptional sales performance in high-end malls. Rent in decentralised areas edged up by 0.9% as most malls still faced supply pressure and some leading regional malls continued to outperform.


Net absorption reached 209,600 sqm in another quarter of strong demand, with both new completions and existing assets seeing robust take-up. The 3PL sector continued to be the main source of demand, as domestic and international logistics firms signed new leases and renewals. “Manufacturers represented another major demand source, with particularly active leasing from new energy vehicle companies and related industries.” said Richard Huang, Co-Head of Logistics & Industrial for JLL China. In addition, emerging demand remained active, with cold chain operators seeking space in Shanghai.

Two new projects delivered around 180,000 sqm space to Shanghai’s logistics market. Both Lingang Modern Logistics project and New Ease Galaxy Phase 1 saw strong net take-up upon completions. Shanghai's vacancy rate fell from 5.9% to 4.4% despite large supply in this quarter. Most submarkets saw progress in leasing out space. Similar to last quarter, Jinshan submarket saw a relatively large decline in vacancy rate because of high starting vacancy rate and strong take-up in new completions.

Warehouse rental growth accelerated to 1.1% q-o-q on a like for like basis with rents reaching RMB 1.53 per sqm per day. Rent growth also increased to 2.8% in y-o-y terms. The rising growth rates indicate landlords in most submarkets feel more comfortable raising rents given the market's low vacancy rate and strong demand.


Despite rising mortgage rates and continued tightening of home purchase restrictions (HPRs), Shanghai's sales momentum stayed solid as 56% of newly launched projects outperformed in terms of pre-commitment rates. That said, given the quarter's limited new supply, mass-market primary sales volumes edged down 3.9% q-o-q. The high-end segment saw upgraders' demand remain buoyant under continued price caps. A total of 760 high-end units were sold in the quarter, up 56.1% q-o-q. Buying momentum also was strong in three new projects launching this quarter, which achieved high sales rates on their first launch dates.

Shanghai postponed projects' launch schedules and pre-sale permits for new projects due to a rebound of COVID-19 in China, leading to a relative shortage of supply in the third quarter. In the mass market, a total of 1.6 million sqm of new supply launched, down 37.8% q-o-q and 42.7% y-o-y. In the high-end segment, three projects launched this quarter. The projects supplied 376 units with average prices ranging from RMB 115,000 to RMB 136,000 per sqm and were well received by upgraders.

Given the limited new supply and good buying demand, high-end primary prices edged up 0.8% q-o-q. Nonetheless, buying momentum in the secondary market slowed under tighter mortgage policies, and price growth decelerated to 1.4% q-o-q amid the city's tougher price verification policy.

Larger supply is expected in 4Q21. Although HPRs are expected to remain tight, the recent relaxation of the shortlisting ratio for first-hand home purchasing thresholds means that more buyers will be qualified to purchase new homes. As such, price-capped primary projects will continue to be favored by homebuyers over secondary projects. We expect high-end primary prices to be largely stable in the coming quarters given government-imposed price caps. Meanwhile, secondary price growth is expected to further slow down due to tighter mortgage policies, new price verification policies, and primary market activity diluting secondary market demand.

Capital Markets

Total transaction volume in the third quarter reached RMB 41.1 billion. While this represents a decline from the previous quarter, transaction volumes for 2021 as a whole still appeared on track and surpassed that of 2020. Developers accounted for over 60% of sell-side transactions, as the government’s “three red lines” regulation has made raising funds more difficult and some players with debt issues have become more willing to sell assets. This trend will likely to persist into the final quarter of 2021, with institutional investors taking advantage of the opportunity to bolster their property portfolios.

Office assets were the primary acquisition targets, accounting for half of the quarter’s total transaction volume. The popularity of office assets comes off the back of strong office leasing over the first half of the year, particularly in Tier 1 cities like Shanghai.

“We are seeing China’s property market transforming rapidly this year. There is uncertainty in the market – though at the same time this represents a period of opportunity as well,” said Eric Pang, Head of JLL Capital Markets China. “On the other hand, we expect continued activity in the logistics, business parks, and multi-family sectors as C-REITs have shown a viable exit strategy to institutional investors.”

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