Shanghai sees increase in rental demand for commercial office space

Shanghai experienced a significant recovery in rental demand for commercial office buildings in the fourth quarter of 2025.

A landmark project in the heart of Shanghai, the Pacific Xintiandi Commercial Center spans some 390,000 square meters and features three commercial office buildings. Situated in one of the city's busiest commercial districts, the project has already achieved over 60 percent occupancy, primarily attracting leading and renowned international companies.

"Because the Huangpu District is a core CBD area. So, it's not like one or two single industries we are focusing [on]. Instead, we have a lot of top-tier companies from different industries," said Bruce Dai, deputy general manager of the office business management with Shui On Xintiandi.

Data from real estate consultancy Knight Frank show that 63 percent of the firms renting offices in Shanghai in the fourth quarter of 2025 were domestic firms, up four percentage points from a year earlier. However, in core areas like Xintiandi, international companies remain a major renting force.

"The completion of the office part was in 2024. We only took one and half a year to lease out the whole three office buildings with an 65 (-percent)-average occupancy rate. So I think we are doing pretty well facing the challenging market," Dai said.

Shanghai's office building market has indeed been challenging. The city's net absorption in Grade-A office buildings, which refers to net change in occupied space, dropped by nearly 11 percent in 2025 from a year earlier. Net absorption recovered in the fourth quarter of 2025, jumping by 9.3 percent quarter on quarter.

"We think this is an early sign showing the market recovery backed by the resilience of the Chinese economy. So if you look at the supply side, the last quarter's new supply recorded at 216,000 square meters, it was also up by 55 percent. So it pushed up the vacancy rate by 0.5 percent and reach to a historic high at 23.8 percent. This marginal improvement is actually showing the tenant demand is beginning to stabilize," said Virginia Huang, managing director of North and East China, Knight Frank.

Shanghai sees increase in rental demand for commercial office space

Soaring oil prices triggered by the Middle East conflict are rippling through Japan's economy, which could worsen as summer is approaching, according to a Japanese economist.

Japan relies on the Middle East for more than 90 percent of its crude oil imports, making it highly vulnerable to the effective closure of the Strait of Hormuz following the outbreak of the Middle East conflict at the end of February. The disruption has driven sharp rises in crude oil prices in the country.

In an interview with China Media Group (CMG), Kohei Misunami, associate professor at Teikyo University's Faculty of Economics, expressed concerns about how Japan's policymakers will use existing financial resources to rein in energy costs.

"If the war lasts longer than four weeks and develops into several months, due to the issue of financial resources, how to utilize existing financial resources while suppressing the rise in domestic gasoline prices -- such a balance will become a rather difficult policy operation," he said.

The professor warned that due to the time lag in transmission of prices between energy and electricity, persistently high oil prices will push up electric bills during the upcoming summer -- the peak power consumption season.

"It usually takes about three to four months for fuel price increases to be reflected in electricity prices. It's March now. In three months -- June, July, August, temperatures will be gradually rising, and the demand for power will surge too. The combination of these two factors is worrying," he said.

The Japanese government started an unprecedented oil reserve release on Monday to ease the impact of volatile international oil prices. The release totaled around 80 million barrels, equal to roughly 45 days of Japan's domestic oil consumption, marking the largest-ever drawdown of the country's oil reserves.

Japan feels pain as Middle East crisis drives up fuel prices