Sluggish Shanghai office market gives tenants chance to bargain on rents, with landlords keen to attract or retain clients

A large number of tenants are either viewing different office buildings to reduce rents, or are seeking big discounts when negotiating lease renewals, JLL says

Average rents in prime areas remained flat in December

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A view of the Lujiazui skyline from The Bund in Puxi, on the banks of the River Huangpu in Shanghai. The vacancy rate in Puxi stood at 31.2 per cent in December, compared with 29.7 per cent three months earlier. Photo: Tracy Qu

Published: 8:05am, 12 Jan 2024

A weak office market in Shanghai is offering tenants the chance to strike lucrative leasing deals, allowing companies to save on rent amid a glut of new building supply and a slowing economy.

A rising vacancy rate has put pressure on landlords to cut rents to keep existing tenants or attract new clients, with some offering discounts of up to 50 per cent, according to property consultancy JLL. Vacancies in mainland China’s commercial and financial capital stood at 22.9 per cent at the end of 2023, an increase of 1.3 percentage points over September, JLL said.

In Puxi, a noncore business district west of the Huangpu River, for instance, the vacancy rate stood at 31.2 per cent in December, compared with 29.7 per cent three months earlier.

“A large number of tenants are inspecting different office buildings,” said Jacky Zhu, a senior director of office leasing advisory at JLL Shanghai.

“Some are chasing lucrative leasing deals to reduce [rental] costs, while others are sniffing out how big a discount they can ask landlords for when negotiating lease renewals.”

The weak office market follows a failure by Shanghai’s economy to live up to expectations amid lacklustre investment and sluggish consumer spending, after China’s exit from its stringent zero-Covid policies in the first quarter of 2023.