Inventory Clearance Accelerates: 22 Provinces Lower Commercial Property Down Payment Ratios

Source: 21st Century Business Herald Author: Zhang Min

On March 16, the Shanghai headquarters of the People’s Bank of China issued a notice stating that the minimum down payment ratio for commercial real estate (including “mixed-use residential and commercial properties”) in Shanghai has been adjusted to no less than 30%. This move aims to accelerate the destocking of commercial office real estate and further boost market transaction activity.

On January 15 this year, Zou Lan, spokesperson and deputy governor of the People’s Bank of China, stated that, in conjunction with the China Banking and Insurance Regulatory Commission, the minimum down payment ratio for commercial real estate purchases would be lowered to 30% to support destocking in the commercial office market. Two days later, the two departments jointly issued the “Notice on Adjusting the Minimum Down Payment Ratio for Commercial Real Estate Purchases,” clarifying that the minimum down payment ratio for commercial real estate loans would be adjusted to no less than 30%.

Previously, the minimum down payment ratio for commercial real estate loans was 50%. In practice, some banks set it at 60% or higher. Therefore, this move is seen as an important signal for destocking commercial real estate.

According to incomplete statistics from 21st Century Business Herald, as of now, 22 provincial-level administrative regions have lowered the minimum down payment ratio for commercial real estate. Some provinces and cities have also introduced other measures to promote destocking of commercial properties.

Various actions indicate that the pace of destocking commercial real estate is accelerating.

Longer than residential

Commercial real estate generally refers to office buildings, retail shops, and other properties with commercial ownership rights. Unlike residential properties, commercial real estate typically has a 40- or 50-year ownership period, and its tax and fee burdens are usually higher than those of residential properties.

Due to multiple factors, China’s current commercial real estate inventory is relatively large. According to data released by the National Bureau of Statistics, as of the end of February this year, the area of unsold commercial housing nationwide was about 800 million square meters, including 190 million square meters of office buildings and commercial properties, accounting for approximately 23.9%. At the same time, about 710 million square meters of office and commercial properties are under construction.

Because of more restrictive measures than residential properties, the threshold for purchasing commercial real estate is relatively higher, and the destocking cycle is longer than that of residential properties. Based on the average sales speed over the past 12 months, the current destocking cycle for office buildings (calculated using the unsold area as of February 2023) is approximately 28 months, while for commercial properties it exceeds 30 months.

In comparison, the destocking cycle for residential properties is only about 7 months.

According to a report by CBRE, a commercial real estate service firm, this year, the new supply of office buildings in 10 major cities nationwide is expected to reach 4.7 million square meters, a slight increase of 7% year-on-year. By 2027 and 2028, this will gradually decline to 4.2 million and 3.5 million square meters respectively. For retail properties, the new supply in the next two years in eight major cities is expected to be 4.39 million and 3.56 million square meters, continuing to remain ample, with increases in supply areas in Shanghai, Guangzhou, Hangzhou, Nanjing, and Tianjin compared to previous years.

In recent years, calls for strengthened policy intervention and promotion of destocking in commercial real estate have been increasing.

During this year’s Two Sessions, Liu Yonghao, member of the National Committee of the Chinese People’s Political Consultative Conference and chairman of New Hope Group, suggested optimizing planning layouts, reducing the proportion of new commercial land, supporting the revitalization of existing commercial and office assets, optimizing “commercial-to-residential” policies, and moderately relaxing restrictions on apartments related to school enrollment and household registration.

Liu Yonghao pointed out that demographic changes and the rise of online shopping are weakening the role of offline commerce. He said that besides measures to absorb existing inventory, “new planning must consider changes in economic forms and make appropriate adjustments, avoiding excessive commercial planning.”

Policy benefits continue to be released

Prior to this adjustment of the minimum down payment ratio, policies aimed at destocking commercial real estate had already been introduced.

In September 2025, the General Office of the State Council issued the “Opinions on Releasing the Potential of Sports Consumption and Promoting High-Quality Development of the Sports Industry,” encouraging the lawful use of industrial factories, commercial properties, and warehousing spaces to create sports venues.

On November 28, 2025, the China Securities Regulatory Commission solicited public opinions on launching a pilot program for commercial real estate investment trusts (REITs). The core of this pilot is to open up the rights and interests financing channels for commercial real estate, providing standardized financial solutions for revitalizing existing assets.

This year, positive signals continue to emerge.

On March 5, the Ministry of Natural Resources and the National Forestry and Grassland Administration issued the “Notice on Further Ensuring Natural Resources Elements,” clarifying that new construction land will prioritize major projects and public welfare development, generally not used for commercial real estate development.

The “14th Five-Year Plan” outline released this month emphasizes promoting the classification and disposal of land that has been supplied but not developed and projects under construction, as well as revitalizing existing commercial and office properties. It also mentions advancing the renewal of industrial and commercial land use rights in a lawful and prudent manner.

Analysts generally believe that this not only indicates adjustments on the supply side but also that the revitalization of idle commercial properties is expected to accelerate.

At the local government level, many cities have recently introduced policies to support destocking in the commercial office market.

For example, Shanghai allows commercial office buildings to be compatible with functions such as hotels, research and development, cultural and sports facilities, medical services, education and training, and rental housing (including talent apartments); Hangzhou has introduced policies related to reforming commercial and industrial land, clarifying mechanisms for efficient revitalization of existing spaces; and some cities permit temporary changes in the use of buildings.

In terms of subsidies, Wuhan offers a 50% subsidy on deed tax for purchasing new commercial office properties; Nanning provides a 10,000 yuan housing subsidy for purchases over 100 square meters of commercial office projects.

Cushman & Wakefield notes that exploring pathways to revitalize idle commercial and office spaces will be a key policy focus this year, and more attempts are expected across regions.

Regarding the significant reduction in the minimum down payment ratio, the agency states that in the short term, it will help alleviate inventory pressure and improve cash flow for developers; in the medium to long term, it provides financial support for revitalizing existing assets.

However, Cushman & Wakefield also points out that this move does not signal a comprehensive market reversal. Compared to residential mortgages, commercial real estate loans still have notable differences in loan-to-value ratios, interest rates, and terms, and banks will carefully determine specific down payment ratios based on client risk profiles. More importantly, the activity level of commercial real estate transactions fundamentally depends on the overall economic climate. To truly unlock “silent assets,” market confidence and the vitality of the real economy must recover in tandem.