“The market remains under significant pressure, as structural oversupply and sluggish occupier sentiment weigh heavily on leasing activity. Landlords are increasingly resorting to aggressive incentives and flexible leasing models in a bid to retain tenants and stabilise occupancy.”

JAMES MACDONALD, SAVILLS RESEARCH



Market competition remains fierce

• Three projects totalling 184,000 sqm were delivered in Q2/2025. Numerous completions are scheduled for H2/2025, with total stock expected to reach 21.3 million sqm by year-end.

• Citywide net absorption reached 24,000 sqm in Q2/2025, down 63% QoQ. In H1/2025, non-prime areas continued to lead in net take-up, driven by strong performance in submarkets such as North Station, Hongqiao-Zhongshan Park, North Bund, and Xujiahui.

• Despite vacancy rate declines in half of the submarkets, the citywide average vacancy rate rose by 0.5 ppts QoQ to 23.7% in Q2/2025.

• While incremental demand slowed, relocation demand remained active, particularly among retail tenants. The financial, manufacturing, and information technology sectors also showed relatively strong leasing activity.

• Grade A office rents declined 4.9% QoQ on an index basis in Q2/2025, averaging RMB5.4 psm pday. Prime, non-prime, and decentralised rents fell by 6.6%, 4.2%, and 4.6%, respectively.

• Some landlords have lowered tenant requirements and accepted third-party office operators, which has helped boost occupancy while introducing greater product diversity. Profit-sharing arrangements allow both parties to share risks and benefits.