5 May 2017
Shanghai Retail Market Report Q1 2017
THE LUXURY RETAIL MARKET STARTED TO PICK UP
In the first quarter (Q1) 2017, the traditional off season for shopping centre opening, Shanghai’s retail property market remained stable and retailers were cautious about expansion.
Consumer retail demand was vibrant during the New Year and Chinese Spring Festival, but retail sales growth slowed down in Q1.
The wave of store closure continued. On 26 February, UK-based Marks & Spencer (M&S) closed their stores in Wanda Plaza, Wujiachang and Sky Mall, Xinzhuang.
However, there were some new brands entering the Shanghai market for the first time. For example, the first Victoria’s Secret flagship store on the Chinese mainland soft opened in Lippo Plaza on Huaihai Middle Road, covering 2,200 sqm of space on four storeys spanning from the basement to level three.
In Q1, ground floor prime retail rents in Shanghai increased slightly by 0.9% quarter on quarter (Q-o-Q) to RMB55.5 per sqm per day (see Table 1). Excluding shopping malls closed for renovation, the overall vacancy rate decreased 1.6 percentage points quarter on quarter to 10.6% (see Table 1).
In the coming year, the retail market in Shanghai will be dominated by three pillar formats, namely shopping malls, convenience stores and online shops.
Facing fierce competition, traditional shopping malls in prime retail areas are undergoing renovation and transformation.
In the coming few years, new retail supply in prime areas will remain limited and new retail malls will focus on non-prime areas.
In Q2, most new retail malls will be in Minhang District, including Lilacs International Commercial Centre (47,000 sqm) in Pudong as well as Vivo City (120,000 sqm), the Mixc (240,000 sqm) and Aegean Shopping Mall (240,000 sqm) in Minhang.
Besides Food & Beverage (F&B), consumer demand will remain strong for culture, recreation, entertainment, sports and kid’s products.
Retail rents will grow steadily in the coming 12 months, by 3-5%, whilst the overall vacancy rate of shopping malls will stay at around 10%.
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