Chongqing - "Amid deep shifts in the global economy and domestic structural adjustments, China's real estate market is witnessing breakthrough opportunities. The consumer market is prioritizing shopping experiences and value for money, gradually evolving its business models," said James Macdonald, Head of Market Research at Savills China, on February 17.

On June 15, 2024, a real estate sales office in Nanping District, Chongqing, was swarmed with a massive crowd. (Photo/Lan Liya)

Macdonald added that the office sector is enhancing its competitiveness through flexible leasing and efficient space utilization, and the logistics sector is optimizing resource allocation and addressing supply pressures with a de-homogenization strategy.

China's real estate market has entered a new era where quality, resilience, and cautious growth are essential. Savills recently released the 2025 China Real Estate Market Outlook.

The report highlights that consumers value the emotional experience and cost-effectiveness of shopping. Non-standard commercial spaces, with open layouts and park-like settings, are gaining popularity as they offer a unique shopping experience.

Chongqing stands out for its innovative commercial designs, with unique spatial layouts featuring slopes, bridges, and tunnels. In Xiahao Lane, visitors hike uphill through hot pot aromas. Chengdu also offers non-standard retail spaces, like sunken complexes PARK Regular and the popular Luxe Lakes CPI Island, adding a fresh twist to urban retail.

The Xiahao Lane in Nan'an District, Chongqing. (Photo/Zheng Ran)

The report said that retailers continue to favor first-tier cities for brand launches or store expansions, while lower-tier cities are emerging as key drivers of consumer growth. Chinese retailers are consolidating their resources to expand overseas, aiming to succeed in emerging markets by offering affordable, functional products.

Domestic brands have an edge over international ones due to their agility, social media expertise, and emerging channel use. They're also expanding in Southeast Asia. For international brands, localization strategies or joint ventures with Chinese partners are crucial for attracting quality-conscious consumers and boosting store appeal through offline marketing.

Savills predicts that vacancy rates will continue to rise slowly in most cities in 2025. Converting Grade B and C office spaces to other uses will be a critical strategy to alleviate the oversupply in the domestic office market.

In the logistics market, from 2020 to 2023, annual supply in 31 major logistics cities exceeded 10 million square meters, but this slowed in 2024 as new supply declined. Due to global instability and lower corporate earnings, companies are being more cautious with logistics and warehousing investments.

Investors are focusing on high-quality, sustainable logistics assets in first-tier cities to attract multinational tenants and reduce risks. Warehousing and logistics REITs have been highly successful, and their numbers are expected to grow.

China's residential market has adjusted over four years. By 2024, policies aimed at stabilizing the market had led to measures supporting growth. Data from November 24 showed a narrowing decline in home prices, signaling gradual stabilization.

Additionally, urban regeneration is emerging as a new focus for urban development. This process promotes the reuse of building stock and enhances urban infrastructure, fostering more sustainable, efficient, and vibrant cities. These initiatives not only support the gig economy but also meet consumers' growing desire for authentic, unique urban experiences. In turn, they enhance cities' overall livability and sustainability, creating spaces where both businesses and communities can flourish.

Savills anticipates a slight increase in the investment market's overall transaction volume in 2025, driven by further liquidity easing and the partial restoration of market confidence.