“While it’s encouraging to see a more proactive government stance, its impact on the market will take time to materialise, and the full extent remains uncertain, meaning any market recovery is likely to be gradual.”

JAMES MACDONALD, SAVILLS RESEARCH



Shanghai office market responds to evolving demand

• Three new projects were delivered in Q1/2025, adding 198,000 sqm to the office market. This contributed to a cumulative stock of 19.9 million sqm by the quarter’s end.

• Total net absorption was 61,000 sqm in Q1/2025, reflecting a decline both QoQ and YoY due to constrained leasing demand, tenant downsizing, and non-renewal of expired leases.

• Despite increased leasing activity, final transactions still require time, prolonging the absorption period for both new and existing projects. The citywide average vacancy rate increased by 0.5 ppt QoQ to 23.2%.

• Grade A office rents declined by 3.6% on an index basis in Q1/2025, averaging RMB 5.7 per sqm per day. Prime, nonprime, and decentralized rents fell by 2.6%, 3.2%, and 4.8%, respectively.

• Five-year lease deals have increased, especially with multinational tenants in sectors like retail and healthcare. These leases often involve whole floors, benefiting both landlords who want to maintain occupancy and tenants who seek better terms.

• Shanghai’s HTH area plans to expand from 151 sq km to 535 sq km, covering districts like Songjiang, Putuo, and Minhang. This expansion aims to boost regional collaboration and attract high-end business services, conventions, and digital tech sectors.