Shanghai's commercial property market steadies as local investors drive rebound

by WANG Tingting

Shanghai's commercial property market steadied in the third quarter as domestic investors filled the gap left by foreign capital and retail demand strengthened. The rebound in China's biggest property market signals that local capital and policy support are starting to stabilize broader confidence.

Investment property transactions jumped 67% from the previous quarter to about 14 billion yuan (US$2 billion), fully funded by local buyers, according to Cushman & Wakefield. Institutional investors such as China Post Life Insurance Co., Ltd. and China Cinda Asset Management Co., Ltd. acquired core office assets, while state-backed and listed firms bought properties for expansion or portfolio restructuring.

CBRE Group, Inc. said offices made up about 60% of total deals, followed by retail at 16% and long-term rental and mixed-use assets at 8% each. JLL reported that average deal sizes nearly doubled from the first half.

"The rebound in core-area deals shows Shanghai's solid fundamentals," said SUN Ling, head of investment and capital markets at JLL East China, adding that the market should continue to firm in the fourth quarter as foreign investors return.

Retail activity also gained traction. Official data showed retail sales rose 3.7% year on year in the first eight months. Cushman & Wakefield said prime-area rents edged up 0.4%, while the vacancy rate fell to 9.3% from about 9.5% a quarter earlier, supported by new shopping centers and a rebound in tourism, both domestic and inbound.

In offices, Cushman & Wakefield said leasing demand improved modestly in the third quarter but remained soft as tenants stayed cautious on costs. The citywide vacancy rate eased to 23.5%, down slightly from the previous quarter. Finance and technology firms accounted for nearly half of new leases, while CBRE said a new Shanghai policy — allowing older office buildings to be converted for mixed commercial and residential use — could help absorb future supply and stabilize rents.