“KIC Corporate Avenue added new supply to the market, while leasing activity improved during the quarter, supported by relocations and upgrades. Rents remain under pressure, though the pace of decline is easing.” —— JAMES MACDONALD, RESEARCH



Supply Enters Optics Valley; Leasing Improves

•KIC Corporate Avenue in East Optics Valley was delivered in Q1/2026, adding 68,000 sqm of new supply and bringing total Grade A stock to 3.30 million sqm by quarter-end.

•Net absorption recovered to 24,000 sqm, with leasing activity picking up from a low base. Finance was the largest contributor to demand (34.1%), led by banks and insurance firms.

•Rents continued to adjust during the quarter. Lower occupancy costs supported tenant upgrades and relocations, which together accounted for over 80% of total leasing demand. The average leasing size increased to 525 sqm, up over 40% YoY.

•The citywide vacancy rate rose by 0.5 ppts QoQ to 43.2%, reaching a new high. Grade A office rent declined to an average of RMB72.1 psm pmth, with the rent index down 1.9% QoQ and 9.7% YoY, although the pace of decline has begun to moderate.

•New supply is expected to reach approximately 339,000 sqm in 2026. Vacancy is likely to remain elevated at above 40%, keeping rents under pressure, while competition on incentives is expected to intensify and widen the gap between projects, particularly in Hankou and tertiary submarkets.