China Index Academy: In the first quarter, the average rent of office buildings in major business districts of key cities nationwide fell by 0.73% month-on-month

According to the Zhitong Finance APP, recently, the China Index Academy released a research report on the office rental index in China for the first quarter of 2025. Based on the survey data of the office rental index from the China Real Estate Index System for major business districts in key cities across the country, the average office rental in major business districts of key cities nationwide in the first quarter of 2025 is 4.58 yuan/square meter/day, a month-on-month decrease of 0.73%, with the decline expanding by 0.12 percentage points compared to the fourth quarter of the previous year, and a year-on-year decrease of 2.1%.

In terms of vacancy rates, according to the data from the China Index, in the first quarter of 2025, the vacancy rate of Grade A office buildings in first-tier cities is relatively low, with Guangzhou having the lowest at 11.4%; among second-tier representative cities, the vacancy rates of Grade A office buildings in Hangzhou and Suzhou are 11.6% and 15.8%, respectively, indicating a relatively balanced market supply and demand. In cities such as Chongqing, Tianjin, Qingdao, Wuhan, and Changsha, the vacancy rates of Grade A office buildings are relatively high, indicating greater vacancy pressure.

01 Office Rental Index Operation Analysis

From the performance of different business districts, there are a total of 69 business districts where office rents decreased month-on-month in the first quarter, a decrease of 2 compared to the fourth quarter of the previous year, accounting for 86%; 10 business districts saw a slight month-on-month increase in rents, accounting for 13%, and 1 business district's rents remained flat month-on-month, accounting for 1%.

From the macroeconomic environment of the industry, in the first quarter of 2025, China's macro economy is steadily recovering, with GDP growing by 5.4% year-on-year, maintaining the same growth rate as the fourth quarter of the previous year. From the three major demands, consumption is steadily increasing; in the first quarter, the total retail sales of consumer goods grew by 4.6% year-on-year, accelerating by 1.1 percentage points compared to the entire year of 2024, with March's total retail sales growing by 5.9% year-on-year, the highest value since March 2024. In terms of investment, driven by the "two 重" construction and "two 新" policies, fixed asset investment grew by 4.2% year-on-year in the first quarter, accelerating by 1 percentage point compared to the entire year of 2024, but the decline in real estate investment remains significant. Exports maintain certain resilience; under the influence of "grabbing exports," the total value of national goods exports grew by 6.9% year-on-year in the first quarter, with March seeing a year-on-year growth of 13.5%. In early April, the United States implemented a "reciprocal tariff" policy, with tariff rates exceeding market expectations, imposing high tariffs on goods exported from China to the U.S., and China's exports are expected to face challenges in the second quarter.

At the same time, the prosperity level of the service industry remains stable, and enterprises have a relatively positive outlook on market development. In the first quarter of 2025, the added value of the service industry grew by 5.3% year-on-year, an increase of 0.3 percentage points compared to the entire year of 2024. From January to March, the business activity index of the service industry remained in the prosperous range, with the index value in March at 50.3%, an increase of 0.3 percentage points from February. The business activity expectation index of the service industry was 57.5%, an increase of 0.6 percentage points from February, remaining in a high prosperity range.

On the policy level, the "Government Work Report" lists "vigorously boosting consumption, improving investment efficiency, and comprehensively expanding domestic demand" as the primary task of government work, while also proposing to "implement more proactive and effective macro policies." In terms of consumption, on March 16, the State Council issued the "Special Action Plan for Boosting Consumption," deploying 30 key tasks in 8 areas to comprehensively expand domestic demand In terms of industrial economy, the "Government Work Report" proposed to promote the safe and healthy development of emerging industries such as commercial aerospace, low-altitude economy, and deep-sea technology, cultivate future industries such as biomanufacturing, quantum technology, embodied intelligence, and 6G, continuously advance the "Artificial Intelligence +" initiative, support the widespread application of large models, and vigorously develop new generation intelligent terminals such as intelligent connected new energy vehicles, artificial intelligence smartphones and computers, intelligent robots, and intelligent manufacturing equipment. In terms of finance and taxation, the "Government Work Report" adjusted the "prudent monetary policy" that has been implemented for 14 consecutive years to "moderately loose monetary policy," proposing to "increase support for technological innovation, green development, boosting consumption, and private and small micro enterprises" and "arrange 300 billion yuan of ultra-long-term special government bonds to support the replacement of old consumer goods with new ones." The central bank proposed to "strengthen counter-cyclical adjustment of monetary policy" at the first quarter meeting in 2025, with overall expressions being more positive compared to 2024. In the second quarter, affected by the U.S. "reciprocal tariffs," external demand pressure increased, and economic growth also faced challenges, making expanding domestic demand the top priority for boosting the economy, with policies expected to further intensify.

Overall, in the first quarter of 2025, the macroeconomic operation remained stable, and domestic demand also showed some recovery, but the recovery of tenant enterprises' operating conditions still requires time. The leasing demand for office buildings in key cities continued to show a mild recovery trend, with most owners still adopting a "price-for-volume" strategy to stabilize renewals and expand new leases, while office rents in key cities continued to decline.

1. Rent Changes: In the first quarter of 2025, office rents in major business districts of key cities fell by 0.73% month-on-month and 2.1% year-on-year.

Figure: Average office rent and month-on-month changes in major business districts of key cities nationwide from 2019 to 2025

Data Source: China Real Estate Index System

In the first quarter of 2025, the office market in key cities continued the weak trend from the fourth quarter of the previous year, with leasing demand primarily focused on renewals and relocations, and new demand being relatively limited. In some cities, the recovery speed of demand was slower than the growth rate of supply, leading to increased vacancy pressure. In terms of rent, most owners still adopted a "price-for-volume" strategy, and office rents continued to decline. According to the survey data of office leasing samples in major business districts of key cities nationwide, the average office rent in the first quarter of 2025 was 4.58 yuan/square meter/day, a month-on-month decrease of 0.73%, with the decline expanding by 0.12 percentage points compared to the fourth quarter of the previous year, and a year-on-year decrease of 2.1%.

2. Business District Performance: Nearly 90% of monitored business districts saw rents decline month-on-month, with significant declines in business districts such as Beijing Fengtai Science Park and Chongqing Jiefangbei.

In the first quarter of 2025, among the samples from first-tier cities, 92% of business district office rents fell month-on-month, while 8% saw an increase. Among the samples from second-tier cities, 82% of business district office rents fell month-on-month, 16% saw an increase, and 2% remained unchanged month-on-month Figure: The fluctuations in office rental prices in major business districts in the first quarter of 2025

Data Source: China Real Estate Index System

In the first quarter of 2025, 69 sample business districts saw a month-on-month decline in office rental prices, accounting for 86%, with a decrease of 2 compared to the fourth quarter of the previous year. Among them, the rental prices in 7 business districts, including Beijing Fengtai Science Park, Chongqing Jiefangbei, and Nanchang Honggutan Central District, fell by more than 2.0% month-on-month. In 18 business districts, including Chongqing Nanping, Shenzhen Diwang, Wuhan Financial Port, and Hangzhou Xixi, the rental price decline was between 1.0% and 2.0%. In 17 business districts, including Beijing Yansha, Guangzhou Pazhou, Nanjing Zhujiang Road, and Hangzhou Qianjiang Century City, the rental price decline was between 0.5% and 1.0%. In 27 business districts, including Shanghai Nanjing West Road, Nanjing Xinjiekou, Beijing CBD, and Chengdu Dayuan, the rental price decline was within 0.5%.

At the same time, a small number of business districts saw a slight month-on-month increase in office rental prices, but the increase was all within 0.6%. Among them, the rental price increase in 3 business districts, including Shenzhen Houhai, Shanghai Caohejing, and Qingdao May Fourth Square, was between 0.4% and 0.6%. In 7 business districts, including Shenzhen Longgang Central City, Tianjin Youyi Road, and Suzhou Hudong, the rental price increase was within 0.3%. The rental price in the Tianjin Xiaobailou Street business district remained flat month-on-month.

3. Rental Trend: Short-term positive factors in the office market have increased, but rental prices still face downward pressure

Since the first quarter of 2025, macro policies have taken effect, promoting a stable recovery of the economy, and the office market continues to show a mild recovery trend. However, some cities still face pressure from vacancies, and rental prices continue to decline.

In the second quarter, affected by the U.S. "reciprocal tariffs," the importance of expanding domestic demand for economic operation has increased under the pressure of exports. It is expected that macro policies will further strengthen counter-cyclical adjustments to consolidate the economic recovery trend. Driven by this, the office market is also expected to see positive changes. However, the leasing demand of tenant enterprises in different industries may show differentiation. The development of the artificial intelligence industry may enhance the willingness of some technology companies to update and expand office space, but in the short term, the leasing demand for office space from some foreign trade-related enterprises may be uncertain. In terms of rental prices, the overall office market remains weak, and there is still downward pressure on office rental prices within the year.

02 Key Cities Office Market Performance

1. Vacancy Rate: With limited new leasing demand, the increase in supply in some cities in the first quarter has led to a rise in vacancies

Figure: Vacancy rates of Grade A office buildings in key cities over the past five quarters

Data Source: China Index Academy CREIS (Click to view)

More data: https://u.fang.com/ytcrnn/

From the perspective of vacancy rate changes, the demand for office buildings in key cities continued to show a mild recovery trend in the first quarter. In some cities, new leasing demand was limited and supply increased, leading to a rise in vacancy rates. In the first quarter of 2025, the vacancy rates of Grade A office buildings in cities such as Guangzhou, Shanghai, Shenzhen, Chengdu, Nanjing, and Qingdao all increased compared to the fourth quarter of the previous year.

2. Block Trading: 55 block trades monitored in the first quarter, with institutional investors accounting for nearly 70% of the trading amount

Table: Block Trading Cases in Key Cities in the First Quarter of 2025 (Partial)

Data Source: China Index Academy CREIS (Click to view)

More data: https://u.fang.com/ytcrnn/

In the first quarter of 2025, China Index monitored a total of 255 block trades, a decrease of 2 trades compared to the same period last year, indicating that the market still maintained a certain level of activity. The number of trades involving first-tier cities was 20, accounting for 33.3%, with Shanghai having the highest number of trades at 12, while Beijing, Shenzhen, and Guangzhou each had fewer than 5 trades; the number of trades involving second-tier cities was 19, accounting for 31.7%, with Suzhou having the highest number at 4, and cities like Zhengzhou, Chongqing, and Ningbo having 1-2 trades each; the number of trades involving third and fourth-tier cities was 21, accounting for 35%, with trading assets mainly located in Dongguan, Foshan, and nearly 20 other cities.

In the first quarter of 2025, based on disclosed amounts, China Index monitored a total of 37.2 billion yuan in completed block trades. The trading amount involving first-tier cities was 26.6 billion yuan, accounting for 71.3%, with Shanghai's trading amount exceeding 16 billion yuan and Shenzhen's exceeding 7 billion yuan; the trading amount for second-tier cities was 5.7 billion yuan, accounting for 15.4%, with Xiamen having the largest trading amount at 1.6 billion yuan; the trading amount for third and fourth-tier cities was 5 billion yuan, accounting for 13.3%, with Dongguan and Foshan having relatively large trading amounts, both exceeding 1 billion yuan. Driven by large transactions such as the acquisition of Shanghai Bohua Plaza by Zhongyou Life Insurance, the average amount per transaction increased to 780 million yuan, an 11% increase compared to the same period last year.

Figure: Proportion of Block Trading Amounts in Key Cities in the First Quarter of 2025 (by Property Type)

Data Source: China Index Academy CREIS (click to view)

More data: https://u.fang.com/ytcrnn/

From the perspective of property types, high-quality office properties are the most favored by investors. In terms of the number of transactions, there were a total of 32 transactions involving commercial real estate (office buildings, commercial properties, complexes, hotels), accounting for 58%. In terms of disclosed transaction amounts, the transaction amount for office buildings was relatively high at 20.7 billion yuan, accounting for 56%, while the total transaction amount for commercial properties, complexes, and hotels was approximately 6.7 billion yuan, accounting for 18%. The total transaction amount for industrial properties, rental housing, and industrial parks was approximately 9.8 billion yuan, accounting for 26%.

From the perspective of buyer characteristics, domestic buyers still dominate the market, with institutional investors having a larger transaction amount. In the first quarter of 2025, based on disclosed buyers, domestic corporate buyers accounted for approximately 87% of the number of transactions, among which institutional investors (insurance funds, fund trusts, asset management companies, etc.) and local state-owned enterprises were relatively active in mergers and acquisitions, with their combined transaction count accounting for over 60%; based on all transactions, the transaction amount for buyers who are institutional investors accounted for nearly 70%.

From the perspective of seller characteristics, real estate companies remain the main sellers in the bulk trading market, with domestic real estate-related enterprises accounting for approximately 40% of both transaction count and transaction amount