1 savills.com.cn/research MARKET IN MINUTES Savills Research Residential Leasing Shanghai – January 2021 Market ends year on positive note Vacancy rates fall as travel restrictions are loosened and the economy recovers. Savills plc Savills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 600 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research. James Macdonald Senior Director China +8621 6391 6688 james.macdonald@ savills.com.cn RESEARCH Please contact us for further information Savills team “Rents have picked up slightly thanks to improving market conditions as tenants slowly return to the market and a growing domestic client base augments demand.” JAMES MACDONALD, SAVILLS RESEARCH • Border controls were partially relaxed at the end September but were tightened again in mid-November. The small window provided enough time for some international tenants to return to their previous leases or start new ones. • Rents increased slightly in Q4/2020, but not enough to overcome deep falls from earlier in the year. High-end rents increased 0.5% quarter-on-quarter (QoQ) to an average of RMB198.5 psm pmth, but remained down 2.5% year-on-year (YoY). • Serviced apartment rents increased 0.4% QoQ to RMB230.7 psm pmth, down 3.1% YoY; strata-title apartment rents increased 0.6% QoQ to RMB182.0 psm pmth, down 1.2% YoY; while villa rents were up 0.7% QoQ at RMB151.6 psm pmth, down 2.0% YoY. • The citywide vacancy rates fell 1.5 percentage points (ppts) QoQ to 13.6% down 0.8 of a ppt YoY. • Serviced apartment vacancy rates fell 1.4 ppts QoQ to 14.8%, down 1.5 ppts YoY; high-end strata-title apartment rates fell 1.7 ppts QoQ and YoY to 12.6%; while villa rates fell 1.3 ppts QoQ to 11.0%, up 1.8 ppts YoY. • Two new projects launched in Q4/2020, Riverdale Residence and Greystar’s LIV’N 833, bringing a total of 767 units to Shanghai’s leasing market. The Shanghai serviced apartment stock now stands at 9,969 units. Louisa Zhu Business Development Director Shanghai +8621 6391 6688*8830 louisa.zhu@ savills.com.cn SAVILLS RESIDENCE
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1savills.com.cn/research
MARKETIN
MINUTES
Savills Research
Residential LeasingShanghai – January 2021
Market ends year on positive noteVacancy rates fall as travel restrictions are loosened and the economy recovers.
Savills plcSavills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 600 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.
“ Rents have picked up slightly thanks to improving market conditions as tenants slowly return to the market and a growing domestic client base augments demand.” JAMES MACDONALD, SAVILLS RESEARCH
• Border controls were partially relaxed at the end September but were tightened again in mid-November. The small window provided enough time for some international tenants to return to their previous leases or start new ones.
• Rents increased slightly in Q4/2020, but not enough to overcome deep falls from earlier in the year. High-end rents increased 0.5% quarter-on-quarter (QoQ) to an average of RMB198.5 psm pmth, but remained down 2.5% year-on-year (YoY).
• Serviced apartment rents increased 0.4% QoQ to RMB230.7 psm pmth, down 3.1% YoY; strata-title apartment rents increased 0.6% QoQ to RMB182.0 psm pmth, down 1.2% YoY; while villa rents were up 0.7% QoQ at RMB151.6 psm pmth, down 2.0% YoY.
• The citywide vacancy rates fell 1.5 percentage points (ppts) QoQ to 13.6% down 0.8 of a ppt YoY.
• Serviced apartment vacancy rates fell 1.4 ppts QoQ to 14.8%, down 1.5 ppts YoY; high-end strata-title apartment rates fell 1.7 ppts QoQ and YoY to 12.6%; while villa rates fell 1.3 ppts QoQ to 11.0%, up 1.8 ppts YoY.
• Two new projects launched in Q4/2020, Riverdale Residence and Greystar’s LIV’N 833, bringing a total of 767 units to Shanghai’s leasing market. The Shanghai serviced apartment stock now stands at 9,969 units.
Louisa ZhuBusiness Development DirectorShanghai+8621 6391 6688*[email protected]
SAVILLS RESIDENCE
2savills.com.cn/research
MARKET NEWSAs the borders reopened in September, Shanghai saw a noticeable decrease in vacancy rate as tenants stranded abroad returned to their leases or started new ones. This was not to last, however, as border controls tightened significantly in mid-November, effectively slamming the door shut for international tenants once again.
Operators and landlords hesitated to increase rents despite the improved occupancy. Instead, they focused on improving services (in particular towards domestic clients) to stand-out in an fiercely competitive market. Landlords and operators will have to continue efforts to attract new tenant groups. 2020 saw several apartment operators increase domestic tenant ratios by close to 20 ppts. New tenants come from a diverse background, with some seeking convenience, others prestige, while others are unable to find units on the sales market that meet their needs.
RENTS & VACANCYWith a small window opened thanks to relaxed border controls, international and stranded tenants made their way back to Shanghai during the quarter, improving vacancy rates across the city. The citywide vacancy rates fell 1.5 ppts in Q4/2020 to 13.6%, down 0.8 ppt YoY .
Rents perked up slightly in response to the falling vacancy rates, but not nearly enough to offset the yearly losses caused by a year’s worth of slowing economy and COVID-19. High-end rents for the overall market stood at an average of RMB198.5 psm pmth in Q4/2020, up 0.5% QoQ, but down 2.5% YoY.
SUPPLY Greystar’s first project in China, LIV’N 833, opened near Zhongshan Park in Q4/2020, bringing 474 units to the market. Riverdale Residences, a new brand from Zhongrong International Trust, opened near Century
Avenue, with 293 units. The combined units brought the Shanghai serviced apartment market stock to 9,969 units.
Six pure for-lease residential land plots were sold in Q4/2020 with an average accommodation value (AV) of RMB5,592 per sq m. All plots were sold at their reserve prices, the highest of which was in the Lingshi Community in Jing’an with an AV of 8,999 per sq m for a buildable area of 67,836 sq m. While it is unlikely that these plots will be turned into high-end serviced apartments, it does show the government’s continued desire to grow the leasing sector, maturing the market and providing more overall competition in Shanghai.
MARKET OUTLOOKLooking forward to 2021, Ascott is anticipated to be active in the market, with a long-anticipated property in Waigaoqiao and two properties under the Somerset brand, one in Hongkou opening in the middle of 2021 and another in Minhang at the end of 2021.
Despite the decrease in vacancy in Q4/2020, the Shanghai serviced apartment market will continue to see headwinds in 2021. Borders have been re-closed, vaccine roll-outs are encountering difficulties and new COVID-19 variants are prompting lockdowns around the world. The first half of 2021 will continue to be difficult for Shanghai’s serviced apartment market until a significant portion of the global population is vaccinated to restart international travel and secondment.
However, when global travel does resume, Shanghai’s high-end residential leasing market should be well-positioned. Domestic demand has been increasing over the past several years, possesses significant growth potential and is far less susceptible to external factors. When international tenants do return, the market is expected to build off this foundation and see a significant boost.
GRAPH 1: Overall Rental Index And Vacancy Rate, 2016 to 2020
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GRAPH 2: Residential Leasing Average Rents, Q1/2016 to Q4/2020
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Source Savills Research
Source Savills Research
Source Savills Research
Source Savills Research
GRAPH 3: Residential Leasing Vacancy Rate, Q1/2016 to Q4/2020
