Shanghai Office Rents Fall for 14th Straight Quarter as New Buildings Flood Market

Grade A office rents in Shanghai declined at the steepest rate since 2022 in the July to September period as tenants stayed cautious at the same time that developers introduced new projects to an overcrowded market. 

Nearly 4.2 million square metres (45.2 million square feet) of grade A space –  equivalent to about 23.5 percent of the city’s total office stock –  stood vacant as of the third quarter, according to a recent report by Cushman & Wakefield. 

Tenants leased 88,712 square metres more office space than they gave back in the third quarter, an increase in net uptake of 3.9 percent from the prior quarter. However, this uptick in corporate commitments was not enough to counter the 222,416 square metres of Grade A office space which developers added to the market in the July-September period, per C&W’s research.

In response to the flood of supply, average rents for leases signed during the period fell 3.6 percent quarter-on-quarter to an average of RMB 205 ($28.5) per square metre per month, marking the fourteenth straight quarter of declines. 

“Amid insufficient demand in (the) office market and the continuous supply of high-quality buildings, vacancy rates and rents will remain under pressure in the short term,” Colliers said in a separate report. 

Surge in Supply

The third quarter drop in average rents represented an accelerating decline from the 1.9 percent slide reported during the preceding three months, according to Cushman & Wakefield. Compared to the July through September period of 2024, office rents were down 9.2 percent.

Tenants have been able to push for lower rates as Shanghai continues to see new buildings enter the market.

The office buildings launched during the third quarter brought new supply in Shanghai this year to around 86 percent of the 2024 total, with Cushman & Wakefield pointing to three new projects to be rolled out before the end of the year, which will add 262,069 square metres of supply to the market. 

Those year-end projects include Crystal Bridge, a joint venture by Tishman Speyer, New Changning Group and Mitsubishi Estate which will add 140,000 square metres of space in Changning district. China Resources Centre, an 80,069 square metre building being developed by state-run giant China Resources Land in Jing’an district.

Given the new supply, Cushman & Wakefield forecasts that rents wil continue to decline for the next 12 months.

Despite vacancy in the city’s core areas tightening to 17.2 percent from 18.4 percent in the second quarter, rents in these traditionally more resilient areas fell 4 percent quarter-on-quarter to RMB 242.1 per square metre per month. 

With the vast majority of new projects being launched in Shanghai’s peripheral locations, vacancy these non-core districts widened to 29.9 percent from 29.1 percent in the second quarter. Rents in emerging districts fell a flatter 2.6 percent quarter-on-quarter to RMB 162.1 per square metre per month, C&W’s data shows.

Demand Driven by Relocation

With businesses remaining leery of new expenditures, relocations accounted for 56 percent share of total leased area during the quarter, reflecting “the new normal of occupier cost reductions and efficiencies”, said Cushman & Wakefield.

Key deals included local pet food maker Oli’s Kitchen taking up 3,500 square metres in Taiwanese conglomerate Ting Hsin International Group’s Golden Square tower on Jiangning Road in Jing’an district and DHL signing up for 3,100 square metres of space in Tower 2 of CPIC Xintiandi Commercial Center, a joint venture by China Pacific Insurance, Shui On Land and Shanghai Yongye Enterprises in Huangpu district.

American luxury jewelry retailer Tiffany signed up for 2,500 square metres in Hang Lung Properties’ Plaza 66 complex on West Nanjing Road in Jing’an district while British law firm Linklaters took up 2,000 square metres in Sun Hung Kai Properties’ Shanghai IFC in Pudong’s Lujiazui financial district.