“A challenging market environment persists, yet strategic government initiatives and adaptive landlord strategies signal a cautiously optimistic outlook for the Shanghai office property market.”

JAMES MACDONALD, SAVILLS RESEARCH



Despite growing demand, the citywide vacancy rate continues to rise and rental declines are accelerating.

• Six new projects totalling 374,000 sqm were handed over in Q2/2024, bringing the cumulative total for H1/2024 to 1mn sqm and the overall stock to 19.3mn sqm by the end of Q2/2024.

• Despite half of the submarkets experiencing vacancy rate decreases, the citywide vacancy rate increased by 0.6 ppt QoQ to 22.3% due to the influx of new supply. Significant take-up was recorded in North Bund, North Station, and Old Huangpu, reducing the non-prime area vacancy rate by 0.3 ppt.

• Net take-up was 186,000 sqm in Q2/2024, bringing H1/2024 net take-up to 486,000 sqm, equivalent to 75% of the total take-up for 2023.

• Landlords continue to offer rental discounts, leading to a 3.4% decline in Grade A office rents in Q2/2024, averaging RMB6.4 psm pday. Prime, non-prime, and decentralised market rents fell by 2.1%, 2.8%, and 4.9%, respectively.

• Despite previous restrictions on extra-curricular children’s classes, several education and training organizations have opened new locations and expanded administrative functions, indicating a gradual recovery in demand.

• Landlords are adjusting leasing strategies to the market situation by lowering tenant thresholds and accepting thirdparty office operators to improve occupancy. Increased leasing activity from these companies is expected in the second half of the year.