In Shenzhen, the customer base of private rental housing mainly consists of students, single professionals and small families. Due to the reduced mobility of residents and migrants’ outflow related to social restrictions, Shenzhen’s rental housing market experienced fluctuations during the COVID-19 pandemic. As social and economic activities returned to normal since the beginning of 2023, the market has been steadily recovering.

The number of private rental housing projects in 2Q23 remains similar to that of 2Q21 as operators made timely adjustments to their existing operations strategies based on business performance. Nearly 23% of the projects that were functional back in 2Q21 has closed down by the end of 2Q23. The majority of those cancelled projects were concentrated in the most competitive submarkets in Longgang, Longhua, and Bao’an districts.

However, considering the sizable migrant population and more preferential policies on real estate investment trusts (REITs), operators closely watched the Shenzhen rental housing market. Over 60 new rental housing projects entered the market from 2Q21 to 2Q23, adding around 12,000 units. Since the beginning of 2023, the gradual easing of operational pressures caused by COVID-19 has further revitalised the market. Rental housing companies founded by well-known real estate developers and holding leading positions in the Shenzhen market, such as China Merchants Aden Hospitality and Vanke Poly, made relatively large contributions to the supply increment under the light-asset strategy in 1H23.

Figure 1: Distribution of private rental housing projects in Shenzhen

Source: JLL South China Research

As of 2Q23, the overall occupancy rate of private rental housing projects in Shenzhen reached 96%. In particular, new projects launched in 1H23 have been well received by the market, scoring an average occupancy rate of 88%. Several rental housing companies, including Vanke Poly, Longfor Guanyu and Gemdale Strongberry, claimed that their projects in Shenzhen significantly outperformed their nationwide averages.

Figure 2: Stock units and occupancy rates of rental housing projects across districts

Source: JLL South China Research

Despite the relatively weak performance of the local labour market and income uncertainty posed some negative effects on the overall rental affordability, the citywide rental level was back on the growth track. The average rent was recorded at RMB 108 per sqm per month as of 2Q23.

Noteworthy, the shortage of mid-to-high-end supply created market opportunity, drawing foreign investors’ attention. For instance, earlier this year, Tishman Speyer announced the formation of a joint venture with Frasers Hospitality to acquire more than 25,000 sqm in Shennan 1001, in Luohu district, for RMB 717 million. The refurbishment plan aims to transform the space into a rental housing project.

Market outlook

Looking forward, Shenzhen will accelerate the establishment of a talent hub to support industrial upgrading and innovation. The increasing number of migrant workers attracted to the city is bound to drive the growth of overall rental housing demand. Meanwhile, Shenzhen will devote greater efforts to developing modern service industries and nurturing strategic emerging industries, which would attract many senior professionals and high-tech talents. Increasing demand may, in turn, further foster the development of mid-to-high-end rental housing.

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