Daily consumption underpins leasing demand

• Shenzhen’s retail leasing activity moderated in Q1 2026, with chain F&B and affordable apparel brands remaining the primary drivers of demand.
• As headquarters to numerous consumer electronics brands, Shenzhen continued to see these companies expand their offline retail presence. With prime urban projects largely saturated, leading brands shifted their expansion focus to suburban projects.

Vacancy rates in most projects remain stable

• The quarter, vacancy rates across most urban projects remained stable. Landlords swiftly backfilled vacant spaces with supermarkets or entertainment and service tenants exited. The urban vacancy rate held steady at 5.5%.
• In the suburban submarket, the opening of MixC Hood and Joy City at the end of last year intensified competition within Bao’an district, leading to higher vacancy rates in certain nearby projects. Thus, suburban vacancy rate modestly rose 0.1 ppt q-o-q.

Rents show further divergence across projects

• Benchmark projects faced limited vacancy pressure. Superior locations and strong foot traffic enabled these projects to attract quality tenants, underpinning stable rental income.
• Normal projects leaned toward large-scale entertainment tenants at lower rents or offered incentives to secure prime brands. However, landlords remained hesitant on further concessions in rents in the early of the year, narrowing the citywide rent decline to 1.8% q-o-q.

Outlook: Diversified stimulus to empower consumption recovery

• Entering 2026, the government expanded its stimulus efforts. Building on existing trade-in programs, Shenzhen is set to leverage major events to drive local consumption, boosting leasing demand in sectors such as F&B and consumer electronics.
• In 2026, only two projects are scheduled to enter the market, a significant decline from previous years. While limited new supply will ease competitive pressure on existing projects, a sustained rental recovery will take time amid still-subdued consumer sentiment.