by WANG Tingting

Shanghai's commercial property market showed early signs of recovery in the first quarter, as policy support and a gradual pickup in economic activity began to lift sentiment across key segments.

Reports from consultancies including JLL and Savills point to a pickup in investment activity, with offices, retail and logistics all seeing improved momentum. Analysts said the market may be nearing a cyclical bottom after a prolonged downturn.

Large-ticket transactions led the rebound. Shanghai recorded about 14.6 billion yuan ($2 billion) in bulk property deals in the quarter, up 27% year on year, according to JLL. The average deal size rose to 610 million yuan, also a 27% increase.

Capital continued to concentrate in prime assets, particularly in core districts. Of 24 deals completed in the quarter, 15 were within the Inner Ring Road, accounting for 70% of total value. Office properties remained the main target, making up two-thirds of total transactions.

Landmark buildings in areas such as Xintiandi, People's Square and Lujiazui changed hands, extending a trend seen last year as investors favored core locations.

JLL said investors were showing greater acceptance of prime assets, even where factors such as shorter land-use terms or fragmented ownership might previously have weighed on transactions.

Three transactions in the quarter involved foreign sellers, and divestments by overseas investors are expected to continue this year in line with broader real estate cycles.

Beyond offices, policy-driven shifts are reshaping parts of the market. In rental housing, urban renewal measures allowing the conversion of commercial land have begun to unlock value in ageing assets. A deal involving the Suhe Base apartment project marked the first market-based transaction of its kind.

Retail assets have also drawn interest, although supply remains tight. A Wanda Plaza project in Shanghai was acquired by a state-backed investor consortium, highlighting continued demand from institutional buyers. Analysts say the limited availability of large, saleable malls remains a key constraint on transactions.

Hotels are emerging as another bright spot, supported by a recovery in tourism. Transactions in central districts such as Lujiazui and Huangpu were completed at yields of around 5% to 5.5%, reflecting steady investor appetite.

Shanghai recorded about 1.15 million inbound visitors in the first two months of the year, up 21.4% from a year earlier, with foreign travelers accounting for about 75% of the total. Hotel occupancy and room rates both rose, lifting revenue per available room.

On the leasing side, the office market remains under pressure but is showing tentative signs of recovery. Savills said new supply reached 263,000 square meters in the first quarter, while net absorption rose sharply, suggesting demand is gradually returning.

Rents, however, continued to fall, down 14.4% year on year, and vacancy edged higher to 23.8%, highlighting ongoing imbalances.

Retail leasing conditions were more stable. Prime rents dipped slightly, while vacancy rates declined, suggesting a gradual improvement in occupancy. Still, analysts said the sector remains in a "bottoming phase", with performance diverging between newer projects and established malls.