Market demand stays cost-conscious, while select industries saw expansionary demand

• In Q3 2025, CBD and DBD net absorption recorded 53,700 sqm and 136,700 sqm, respectively. With the rent disparity between Grade A and Grade B properties continuing to narrow, cost-driven upgrades have become increasingly common among tenants.
• In terms of industries, financial services remained resilient, with private equity firms showing an increasing presence in the market. Additionally, AI-related companies and retail brands focused on outdoor sports continued to demonstrate strong market demand.

Two new projects entered the decentralised market, delivering 127,800 sqm

• As upgrading demand continued to be observed in the quarter, the CBD vacancy rate decreased by 0.6 ppts q-o-q to 16.3%. Landlords of projects with higher vacancy rates remained willing to negotiate.
• The decentralised market vacancy rate decreased by 0.5 ppts q-o-q to 30.5% in the quarter, as the relocation and upgrade demand trend from business parks and suburban areas continued, though pre-leasing activity in new completions was subdued.

The tenant-favorable market continues as rents remain on a downward slope in Q3 2025

• In the CBD market, rent decreased by 5.3% q-o-q to RMB 6.6 per sqm, per day. To maintain occupancy rates, landlords remained flexible in lease term negotiations and were willing to discuss lease restructures with extended leasing terms.
• In the decentralised market, rents decreased by 3.2% q-o-q to RMB 4.3 per sqm, per day. The high vacancy rate affected landlords’ rent expectations, leading them to offer substantial incentives to attract tenants.

Outlook: Supply influx and sluggish incremental demand to sustain tenant-favoured market

• Tenants are expected to remain cost-driven and will seek more advantageous leasing terms, while landlords will further adjust leasing strategies and.
• Due to discrepancies between market rents and tenants’ current rents, more tenants are expected to negotiate for lease restructurings. Overall market rents are likely to continue their downward trend in the short-term.