Shanghai rental housing stays resilient amid volatility

Shanghai’s rental housing sector showcases remarkable resilience across both the leasing and investment markets throughout 2025. The leasing sector maintained stable operating performance over the past year, with mature projects (operational for more than six months as of year-end) achieving average occupancy rates near 90% by year-end. This performance delivered full-year net absorption of nearly 55,000 units.

Two key demand drivers underpin this stability. First, Shanghai’s diverge and resilient renter base, including non-local young white-collar workers, freelancers, students, and families with children, increasingly seeks professionally operated, well-furnished, and neighbourhood-oriented living spaces. Additionally, sustained and expanding policy support from Shanghai’s government has strengthened demand fundamentals. New measures include relaxed tenant eligibility criteria for affordable rental housing projects and expanded rental subsidies for qualified renters being introduced.

Figure 1: Shanghai’s rental housing stock and average occupancy rate, 2021-2025

Note: Average occupancy rate is calculated based on mature projects that have been operational for more than six months as of year-end
Source: JLL Research

This is not to suggest the sector has been without challenges. Over the past few years, short-term new supply waves have intensified competition across projects and tempered rental growth. These supply waves stem primarily from R4 land parcels (zoned exclusively for rental housing) transacted in earlier years (2017-2021). Despite this, the sector shows increasing bifurcation.

At a broader level, projects located within Shanghai’s central areas, specifically within the inner and middle ring roads, consistently outperform suburban counterparts in both rental growth and occupancy rates. This outperformance stems from stronger, more concentrated tenant demand and significantly lower near-term new supply. R4 parcels capable of delivering hundreds or even thousands of units remain scarcer in these locations. At a more granular level, aside from projects within central business districts, well-furnished projects situated close to business parks serving high-growth sectors such as AI, advanced technology, and internet services deliver robust operating performance. Many companies have begun subsidising their workforce to live closer to where they work, supporting this trend.

Furthermore, projects located within walking distance of metro stations that offer convenient access to business districts also outperform, as white-collar professionals increasingly prioritise faster commutes to work, sometimes even at the expense of higher rental costs.

On the investment front, interest in Shanghai’s rental housing sector remained strong throughout 2025. The buyer profile remained diverse, with growing participation from insurance capitals actively pursuing quality assets, alongside state-owned institutions and foreign investors actively exploring opportunities. The sector saw an increasing share of core-strategy transactions completed over the year, with more projects successfully reaching stabilisation and generating stable cash flow. This matched many investors' growing appetite for stable income-generating assets to anchor their portfolios.

Looking forward, substantially fewer R4 parcels have been transacted over the recent years, suggesting new supply pressure should moderate. This may enable the leasing market to deliver stronger results going forward. Meanwhile, strong investment momentum in Shanghai’s rental housing sector should continue and likely attract more investors to allocate capital.  Steadier leasing market fundamentals and sustained investment market liquidity support this outlook.