Shanghai’s office vacancy rates have continued to rise, as corporate tenants tighten their purse strings and new supply comes online, causing average rents to keep falling.

The overall vacancy rate hit 21.6% at the end of September, an increase of 1.2 percentage points from June, property services firm JLL reported last week. Rents, meanwhile, dropped 1.4% to 7.2 RMB ($0.99) per square metre per day.

A total of 341,000 square metres of new premium office space hit the market in the third quarter of 2023, increasing pressure on landlords to either retain existing tenants or attract new clients to bring the vacancy rate down.

“Supply is outdoing demand in the (Shanghai) market now,” said Stanley Jiang, head of project leasing at JLL Shanghai’s office leasing advisory division. “The weak office market gives companies opportunities to adjust their office rental strategies to save costs.”

Property consultancy CBRE forecast in July that 953,000sqm of new grade-A office space would be available in Shanghai in the second half of this year, nearly twice the 529,000sqm of new space that was completed during the first six months, so the situation is expected to get much worse for office landlords in the city.