Empty Shops, Falling Rents: Commercial Property Takes A Hit In China Retail Slump

China’s shop rents have fallen back to levels last seen in 2018 as weaker consumer spending weighs on the retail sector, according to the China Index Academy.

In the second half of 2025, average rents across a sample of 100 major commercial streets in 15 key mainland cities dropped to 24 yuan (US$3.50) per square metre per day – the lowest since the second half of 2018 – the independent real estate research firm said in a report published on Monday.

The pace of decline accelerated compared with the first half of the year, with rents slipping 0.8 per cent for 2025 overall, a steeper fall than in 2024.

“Slower growth in catering revenue, compounded by competition from high-quality shopping malls, has put most commercial streets under pressure and pushed rents lower,” the academy said.

Chinese consumers have been spending cautiously and saving more amid uncertain job prospects and a prolonged property downturn that has eroded household wealth tied up in real estate.

China’s surveyed urban unemployment rate stood at 5.1 per cent in December, while the jobless rate among those aged 16 to 24 was 16.5 per cent.

The country is now in its sixth year of a property slump despite a wave of policy support aimed at stimulating home purchases, and analysts expect prices and sales to keep declining for another two years.

A quarterly survey by the People’s Bank of China showed only 22.5 per cent of households planned to increase spending, while 62.9 per cent said they intended to save more.

Outlets retailing forms of ‘emotional spending’, such as plush toys, are increasingly replacing luxury stores in prime retail locations. Photo: EPA

Household deposits reached 166 trillion yuan (US$14.5 trillion) by the end of last year – a record high and triple the level of a decade earlier.

Retail sales, a key gauge of consumer demand, rose just 0.9 per cent year on year in December, marking the slowest monthly growth in three years.

Soft demand, along with the emergence of new consumption trends, is reshaping China’s retail landscape. Electric-vehicle-related businesses and outlets based on “emotional spending”, such as plush toys, are increasingly replacing luxury stores in prime retail locations.

Shop rents have been declining since the onset of the Covid-19 pandemic, with many retail property projects cutting rates to boost occupancy and reduce vacancies, the China Index Academy said.

As in the residential market, the retail and office property segments remained under pressure. In 2025, sales of commercial and office properties fell 8.6 per cent by floor area, while investment in the sector dropped 17.3 per cent to 915 billion yuan, according to the research firm.

In the fourth quarter of 2025, average office rents in major business districts across key cities nationwide stood at 4.53 yuan per square metre per day – the lowest level in at least six years, it said.