knightfrank.com.cn/researchQ1 2024
This report focuses on the Grade-A office market in Shanghai, with
information about supply and demand, rents, vacancy rates and the
office investment market
Shanghai Grade-A
Office Market Report
New completions and higher vacancy rates led to a decline in rents
The Shanghai office market
continued to perform poorly in the
first quarter (Q1). Three new projects
were completed in the office market,
bringing a total of 341,799 sqm of
office space to the market, a decrease
of 21.8% QoQ. Net absorption in Q1
was only 49,544 sqm, and sluggish
demand was one of the main reasons
for the downturn. Rent reductions by
landlords led to a further 1.8% decline
in the average market rent to RMB7.79
per sqm per day. Under the dual
impact of many new completions and
more vacant office space, the overall
vacancy rate continued to rise to
20.1%, an increase of 0.9 percentage
points QoQ. In Q1, leasing demand
came mainly from industries such as
TMT, finance, biopharmaceuticals,
and professional services. Leasing
demand from biopharmaceutical
companies showed a significant
rebound this quarter, with a QoQ
increase of 13 percentage points in
market share.
In 2024, over 2 million sqm of
Overview and Outlook
new projects are expected to be
completed, which will put significant
market absorption pressure on
landlords. Given the current leasing
environment, many landlords are
adopting a strategy of offering
lower rents in exchange for a higher
occupancy rate. For companies
with leasing demand and a flexible
budget, this undoubtedly presents
a rare opportunity. They can get
satisfactory office space at a lower
leasing cost, thus achieving a high-
value configuration of office space.
Fig 2: Shanghai office development pipeline by district, 2024-2026+
South Jing’an (Nanjing West Road)
Pudong (Lujiazui, Zhuyuan, Huamu, Century Avenue,
Qiantan, Post - expo, Yangjing&Yuansheng)
Huangpu (People’s Square, Huaihai Middle Road,
The Bund, Post-expo)
Xuhui (Xujiahui, Xuhui Binjiang, Huaihai Middle Road)
Changning (Zhongshan Park, New Hongqiao, Linkong)
Putuo (Changfeng - Zhenru)
Hongkou (North Bund, Sichuan North Road)
North Jing’an (Daning, Railway Station, Suhe Creek)
Minhang (Hongqiao CBD,Xinzhuang)
Yangpu (Wujiaochang, Dalian Road, Yangpu Binjiang)
2026+
2024 2025
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
‘000 sqm
Source: Knight Frank Research
Fig 1: Shanghai Grade-A office market indicators
Source: Knight Frank Research
[1] Rent refers to average effective rent
Q
New supply
341,799
Q
Net Absorption
49,544
sqm
Q
Rent
7.79
RMB/sqm/day
Q
Vacancy rate
20.1%
Outlook (Q2 2024) :
0.9pp
QoQ change:
sqm
Outlook (Q2 2024) :
QoQ change:
21.8%
61.8%
Outlook (Q2 2024) :
QoQ change:
Outlook (Q2 2024) :
QoQ change:
1.8%
Diverse range of industry distribution of new leasing demand
Supply and Demand
In Q1, three new projects were
completed and delivered to the
market, providing new supply of
341,799 sqm. Although there was a
slight decrease in supply compared
to Q4 2023, the YoY growth rate
remained at 7.2%. Two of the three
new completions were in emerging
markets: EXPO Place T1 and T2, in
Pudong’s Post-expo Area (94,000
sqm in total), and Square City, in
Pudong Qiantan (200,000 sqm). Yi
Fung Place, in the New Hongqiao
Area, operated by Nan Fung Group,
was also completed and delivered in
Q1, providing additional office area of
47,799 sqm.
In Q1, due to the successive
completion and delivery of new
projects with high vacancy rates,
coupled with continued weak
demand, the market vacancy rate
increased by 0.9 ppts to 20.1% QoQ.
As a result, there was a significant
decline in net absorption in the
market, reaching only 49,544
sqm. Within limited demand, new
corporate leases and relocations
dominated leasing activity,
accounting for over 80% of the
market. To attract tenants, landlords
have implemented sustained rent
Fig 4: Grade-A office rental trend
Source: Knight Frank Research
Q 1
Q2
Q3
Q4
Q 1
Q2
Q3
Q4
Q 1
Q2
Q3
Q4
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Q2
Q3
Q4
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Q3
Q4
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Q4
Q 1
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Q3
Q4
Q 1
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Q3
Q4
Q 1
Q2
Q3
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0.00
2.00
4.00
6.00
8.00
10.00
12.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
24
RMB/sqm/day
In Q1, the average rent for Grade
A office space continued to decline
by 1.8% QoQ to RMB7.79 per sqm per
day, representing a 10% decrease
from the recent peak in Q1 2022.
Owing to limited leasing demand in
the market and the continual release
of new projects, market supply has
increased. As a result, landlords have
been forced to lower asking rents to
attract tenants and achieve higher
occupancy.
In Q1, the average rent in the core
CBDs continued to decline by 2.1%
QoQ, reaching RMB10.64 per sqm per
Rents in Core CBDs continued to decline
Rents
Net absorption (left)
New supply (left)
Vacancy rate (right)
0%
5%
10%
15%
20%
25%
30%
0
500
1,000
1,500
2,000
2,500
3,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
24Q1
Fig 3: Grade-A office supply, net absorption and vacancy rate
‘000 sqm
Source: Knight Frank Research
reduction strategies and introduced
a series of favorable leasing schemes
for tenants. These measures have
become key factors in facilitating the
smooth relocation or establishment
of new office space for enterprises
with leasing needs.
Industry distribution of new
leasing demand in Q1 appears
to have been more diversified
than in Q4 2023. TMT, finance,
biopharmaceutical, and professional
services companies were at the
forefront of market demand,
accounting for nearly 70% of the
total leasing demand. Leasing
demand from domestic enterprises
continued to increase, mainly in the
TMT, finance, biopharmaceutical,
and professional services industries.
Leasing demand from foreign
enterprises came mainly from the
finance, biopharmaceutical, and
manufacturing sectors.
In Q1 2024, 15 major transactions
for a total value exceeding RMB8
billion were recorded in the
Shanghai office investment market.
Transactions involving entire floors
and properties valued below RMB1
billion were particularly active. In
addition to the purchasing demand
from owner-occupiers, insurance
funds continue to show interest
in acquiring high-quality office
buildings and retail properties.
Reasonably priced properties with
stable future returns still attract the
attention of insurance funds seeking
asset allocation opportunities.
On 17 January, Shanghai CCB
Housing Service Co., Ltd., a
subsidiary of China Construction
Bank, and a fund company
established by a foreign enterprise,
jointly acquired Shanghai Light
Industrial International Tower,
located on Siping Road in Hongkou
District, for RMB370 million.
In January, Shui On Land sold
a 65% equity stake in Shanghai
Jiuzhe Property to Hongrui
Shouyuan Partnership, a subsidiary
of Dajia Insurance Holdings,
for an initial consideration of
approximately RMB1.206 billion.
After the acquisition, Dajia
Insurance collaborated with Shui
On Land to invest in and develop
the Hongshoufang project on
Changshou Road in Putuo District.
This transaction was part of Shui
On Land’s light-asset strategy, while
Dajia Insurance achieved asset
allocation in high-quality office and
retail properties.
High-quality office and retail properties continue to be favored by insurance funds
Investment Market
day. Little Lujiazui remained the sub-
market with the largest rental decline
in core CBDs, decreasing by 3.5% QoQ
to RMB10.75 per sqm per day.
Landlords in emerging markets
are also facing an imbalance
between huge supply, numerous
new projects, and limited demand.
Therefore, reducing rents remains
the preferred solution for landlords
in emerging markets to address
leasing issues. In Q1, the average
rent in emerging business districts
dropped to RMB6.34 per sqm per day,
representing a QoQ decrease of 1.7%.
Table 1: Major Grade-A office leasing transactions, Q1 2024
Submarket Building Tenant
Area
(sqm)
Type
Huaihai Middle
Road
Shui On Plaza Kimberly-Clark 6,600 Relocation
Zhuyuan
LJZ Financial Hold-
ings Plaza T1
Huatai Futures 3,200 Renewal
North Bund AIA Financial Centre PATEO 3,000 Relocation
Huamu Century 333 AMEDAC 2,000 Relocation
Little Lujiazui BEA Finance Tower BOA Max 1,200 New Lease
New Hongqiao IM Shanghai T4 Shisheng Winery 1,000 New Lease
Source: Knight Frank Research
Note: All transactions are subject to confirmation
Shanghai Grade-A office market
dashboard Q1 2024
Hongqiao CBD
Inventory: 1,422
Rent:
5.29
VR: 21.6%
Inventory: 1,554
Rent:
6.74
VR: 17.7%
Inventory: 601
Rent:
8.02
VR: 20.5%
Inventory: 1,019
Rent:
5.81
VR: 29.8%
Inventory: 1,033
Rent:
7.22
VR: 28.7%
Railway Station
Inventory: 784
Rent:
6.91
VR: 19.6%
Wujiaochang
Inventory: 936
Rent:
5.12
VR: 19.5%
Little LujiazuiQiantanXuhui BinjiangNew Honqiao Xujiahui Century Avenue
Inventory: 1,069
Rent:
9.58
VR: 10.4%
Inventory: 2,787
Rent:
10.75
VR: 6.3%
Inventory: 943
Rent:
7.93
VR: 8.8%
Huaihai Middle Road
Inventory: 1,435
Rent:
11.25
VR: 9.6%
Nanjing West Road
Inventory: 459
Rent:
7.20
VR: 11.9%
Zhongshan Park People’s Square
Inventory: 887
Rent:
7.94
VR: 12.1%
North Bund
Inventory: 988
Rent:
7.28
VR: 34.1%
The Bund
Inventory: 700
Rent:
9.67
VR: 16.1%
Core CBD
CBD
Expanded CBD
Emerging business district
Shanghai Grade-A office inventory, rents and vacancy rates of major business districts
25.88
million sqm
Grade-A office
Total Inventory approx.
Source: Knight Frank Research
Note: unit for market inventory – 1,000 sqm; rents using average effective rent at RMB/sqm/month; VR refers to average vacancy rate.
Shanghai Office
Market Report
Q4 2023
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Market Report
Q4 2023
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