China MarketView Q4 2020

February 26, 2021

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Nationwide leasing activity in H2 2020 was upbeat, with net absorption rising 49% y-o-y to 2.7 million sq. m. Demand was focused on tier I cities including Beijing, Shanghai and Shenzhen, followed by tier II cities in western and central China. The quick rebound in demand ensured rents fell by just 1.1% in H2 2020 after undergoing a sizable downward adjustment in the first half of the year.



The final three months of 2020 each saw retail sales growth in excess of 4% y-o-y. The decline in ground floor shopping rents lost momentum over the course of the year, with a fall of just 0.1% registered in Q4 2020. Nationwide net absorption reached 1.8 million sq. m. in H2 2020, an increase of 71% q-o-q.



Net absorption totalled 1.97 million sq. m. in Q4 2020, an increase of 58% q-o-q and 127% y-o-y and the highest quarterly total since 2017. Oversupply in central, west and northeast markets prompted landlords to adopt more flexible leasing strategies to drive up absorption, leading to a slight 0.3% q-o-q decline in nationwide rents.



While investment was suppressed for much of 2020 due to measures to contain the pandemic, sentiment and purchasing activity gradually improved in the second half of the year.  Transaction volume rose 23% q-o-q to RMB 55.8 billion in Q4 2020, marking the second consecutive quarter of growth. Full-year investment volume reached RMB 194.4 billion, a decline of 28% y-o-y.