Thursday, 10 September 2026
China’s commercial property investment market is recording more transactions, but the improvement in activity is revealing a widening difference between properties that investors still want to own and those that remain difficult to sell. During the second quarter of 2026, 109 commercial real estate investment transactions worth RMB 83.9 billion were completed across China, an increase of 39% from the previous quarter. First-half volume reached RMB 144.2 billion. These figures demonstrate that liquidity is returning to parts of the market, but they do not mean commercial property values have recovered uniformly. The distinction matters because transaction statistics naturally measure buildings that successfully find buyers. They reveal much less about properties marketed unsuccessfully, assets withdrawn from sale, buildings undergoing restructuring or situations where owners and prospective purchasers remain too far apart on price. As China’s property correction progresses, understanding the assets that do not trade may become just as important as analysing those that do.
Beijing and Shanghai provide some of the clearest evidence. Investment activity strengthened in both cities during the first half of 2026, with approximately RMB 25.7 billion transacted in Beijing and RMB 27.35 billion in Shanghai. Domestic capital has become particularly important, with corporations, insurers, Chinese investment managers and other local buyers helping support activity while international investors remain selective. In many cases, however, transactions are taking place only after sellers adjust expectations to reflect today’s rental conditions and investment risks. Recent disposals of foreign-owned commercial properties demonstrate the scale that repricing can sometimes reach. An examination of assets offered for sale in Beijing and Shanghai since 2024 found that a significant proportion had still not completed a disposal by August 2026. Among a small group of five Shanghai properties where previous acquisition values could be compared with subsequent sale prices, the later transactions were completed at prices averaging more than 40% below the earlier purchase values. The sample is too small to represent Shanghai commercial property generally, but it illustrates how substantial the adjustment can be for individual assets before a buyer emerges.
This is why rising transaction activity should not automatically be interpreted as recovering valuations. Liquidity can improve because sellers become more willing to accept the prices buyers are prepared to pay. In that situation, additional transactions represent the establishment of new market values rather than a return to those achieved during the previous property cycle. China’s office sector provides a strong example. Nationwide office vacancy remained around 25% during the second quarter, while rents declined another 2.2% from the previous quarter and approximately 4% over the first half of the year. Leasing activity has improved, but occupiers still have substantial choice, forcing landlords in many markets to compete through pricing, incentives and improvements to their buildings.
The result is increasing differentiation within the same asset class. Modern offices in strong locations with stable tenants and competitive specifications can continue to attract institutions, insurers and corporate purchasers. Older properties with weaker occupancy, significant refurbishment requirements or substantial competing supply can face much greater difficulty establishing an investment value acceptable to both buyer and seller. Shanghai demonstrates how this divergence can occur within a single city. Companies are using favourable leasing conditions to move into better-quality premises, supporting demand for stronger buildings even as the wider market remains under pressure. Well-occupied premium properties can therefore behave differently from ageing or poorly positioned offices only a few kilometres away. Both may officially belong to the same office market, but their prospects for income growth, capital expenditure and eventual resale can be very different.
The city’s business parks show an even sharper contrast. Shanghai recorded approximately 205,000 sq m of business-park net absorption during the second quarter, supported partly by demand from technology industries including artificial intelligence and integrated circuits. Yet vacancy remained around 31.7%, demonstrating that growth industries and substantial excess space can exist simultaneously. For property investors, this makes the quality of the underlying location increasingly important. A building does not become a strong technology investment simply because it sits inside a district marketed around innovation. Properties connected to established corporate clusters, transport networks, research institutions and functioning business ecosystems can have a considerable advantage over projects whose investment case depends primarily on their location within a development zone.
The same divide is visible in logistics. National warehouse net absorption reached approximately 2.73 million sq m during the second quarter, more than double the previous quarter, while vacancy declined to around 18.5%. Despite that improvement, rents fell another 2.5% quarter-on-quarter. Shanghai followed a similar pattern. Logistics absorption exceeded 240,000 sq m during the quarter and vacancy declined to approximately 23.2%, but rents still fell almost 3%. In some peripheral locations, lower rents helped attract occupiers that could take advantage of cheaper space. Leasing therefore improved without producing a corresponding recovery in pricing.
For investors, that distinction is critical. Strong absorption created by scarcity normally improves a landlord’s negotiating position and can eventually support rental growth. Absorption generated partly by substantial rental reductions can improve occupancy while leaving property income under pressure. The headline leasing figure may look similar, but the consequences for valuation are very different. Supply remains another dividing factor. Some Chinese logistics markets have experienced rapid warehouse development, leaving landlords competing aggressively for occupiers. Modern facilities close to major consumer markets, transport infrastructure and established distribution corridors can remain attractive investment products. Properties in heavily supplied peripheral locations may need increasingly competitive rents and acquisition prices to attract tenants and capital.
Retail property is developing its own version of the same divide. China’s national shopping-centre vacancy rate remained relatively contained at approximately 7.5% during the second quarter, although average rents continued to decline. Behind that national figure, retailers are becoming more selective about where they allocate capital. Leading destination centres can attract restaurants, sportswear companies, consumer technology, entertainment concepts and large-format stores capable of generating traffic. Less distinctive shopping centres face greater competition as brands concentrate their networks around locations capable of producing stronger sales and customer engagement. For investors, occupancy by itself may consequently reveal less about a shopping centre’s quality than it once did. Two properties can report similar occupancy while producing very different economic results if one achieves sustainable rents from productive tenants and the other relies heavily on discounts, incentives or short-term leasing to maintain occupied space.
Across offices, business parks, logistics and retail, China is therefore developing a hierarchy of commercial property quality. At the strongest end are assets with locations, tenants and income profiles capable of attracting institutional or strategic capital. These properties can continue trading even in a cautious investment environment. A second group consists of buildings that remain investible but require significant repricing. They may have sound locations or redevelopment potential, but buyers need acquisition prices that compensate for weaker rents, vacancy, future capital expenditure or uncertainty about resale values. The most difficult category consists of properties where the problem extends beyond price. Location, specification, oversupply or physical obsolescence may make restoring investment demand considerably more difficult even after substantial repricing. Some of these buildings will require refurbishment or repositioning before they can compete effectively. Others may ultimately need conversion to a different use or a new ownership and capital structure.
This distinction is turning China’s correction into an asset-management challenge. A lower acquisition price can transform a fundamentally good building into an attractive investment. It cannot automatically repair a property that no longer meets occupier requirements or sits in a market with persistent excess supply. That creates difficult decisions for existing owners. Selling at today’s price can crystallise a substantial loss, but holding an uncompetitive property may require additional capital while rents remain under pressure. Refurbishment can improve an asset’s position, but only where the underlying location and demand justify the expenditure.
Domestic buyers are helping the market work through this adjustment. Chinese corporations purchasing premises for their own occupation, insurers seeking longer-duration investments and domestic funds acquiring repriced properties are providing alternative sources of liquidity as some international investors reduce exposure or become more selective. Their activity is also producing something China’s commercial property market needs: transaction evidence at current prices. Every completed sale helps buyers, lenders, valuers and owners understand where the market is clearing. That process can be uncomfortable because new transactions may reveal values significantly below those assumed several years earlier. Nevertheless, functioning price discovery is an important stage in the recovery of any investment market.
The properties that remain unsold could eventually become more revealing. If high-quality assets increasingly trade while weaker buildings remain on owners’ balance sheets, the difference between liquid and illiquid property could widen. That would also matter for refinancing, because lenders have much clearer valuation evidence for buildings supported by recent comparable transactions than for properties rarely bought or sold. The same process could influence future development. If investors increasingly reward existing buildings with demonstrated occupier demand while heavily discounting speculative properties in oversupplied locations, developers may become more cautious about adding additional supply. Capital could instead move toward refurbishment, repositioning and conversion of existing stock.
China’s commercial property market is therefore moving beyond the simple question of whether a recovery has begun. The more important question is which properties are participating in it. RMB 83.9 billion of transactions during the second quarter demonstrates that capital is available when buyers see sufficient value. It does not demonstrate that every office, warehouse, business park or shopping centre has regained liquidity. Instead, the correction is exposing differences that were easier to overlook when capital values were rising. Strong assets can still attract competition. Properties with recoverable problems can trade after repricing. Buildings facing deeper structural disadvantages may require substantially more than a lower asking price.
This could become one of the defining characteristics of China’s next commercial property cycle. Rather than a broad recovery lifting most assets together, capital may increasingly concentrate around buildings capable of demonstrating durable demand, competitive specifications and credible long-term income. China’s commercial property market is becoming more active again, but the real measure of recovery will not simply be how many buildings are sold. It will be how much of the country’s existing property stock investors are still prepared to regard as investible.
Source: CIJ.World Research & Analysis Team
