Chengdu RetailAsian Cities Report – 2H 2019

REPORT

Savills Research

savills.com.cn/research

Chengdu Retail

‘First-store’ economy upgrades Chengdu’s retail market

CITY OVERVIEWThe Chengdu government announced its “fi rst-store” economy plan in March 2019 as well as 35 “nighttime economy” pilot zones in August 2019, both of which are aimed at further exploring the city’s retail potential and promoting consumer growth. The “fi rst-store” economy is expected to assist Chengdu in achieving its goal of becoming an International Consumption Centre City and enhance the quality of the city’s retail market. The “nighttime economy” extends economic activity hours and raises the city’s overall consumption level, becoming another growth engine for Chengdu’s economy development.

Total retail sales of consumer goods in Chengdu during the fi rst three quarters of 2019 reached RMB542.9 billion, increasing by 9.7% year-on-year (YoY). Chengdu continues to see consumption upgrades with retail sales of wearable digital equipment, new-energy vehicles, fi tness and entertainment all increasing signifi cantly over the past year. Additionally, the online retail market has developed quickly, demonstrated by online retail sales of commodities-above-quota reaching RMB52.7 billion from January to September, increasing by 10.8% YoY, a growth rate 2.5 percentage points (ppts) higher than that of 1H/2019.

RETAIL MARKET OVERVIEWOnly one new shopping mall opened in 2019, with a total GFA of 80,000 sq m. Ito Plaza, located in East Extension submarket, launched in Q1/2019 and pushed the citywide total retail stock up to about 5.8 million sq m. The new mall has successfully met nearby residents’ needs and greatly enriched their consumption choices. It is also optimised for brands to be developed and operated by the mall owners themselves and includes a signifi cant amount of convenient facilities around the mall, considerably improving the consumer experience for the entire area.

Due to limited new supply, Chengdu’s retail property market has continued to adjust in 2019, with the citywide average vacancy rate rising slightly by 0.4 of a ppt from 2018 to 4.9% in Q3/2019. However, stable leasing demand and positive market sentiment supported the steady rise of overall shopping mall fi rst-fl oor average rent. Citywide average fi rst-fl oor shopping mall rent reached RMB436.2 per sq m per month in Q3/2019.

The “fi rst-store” economy plan helps shopping malls to attract new, world-renowned brands from home and abroad while encouraging these brands to launch their latest products in Chengdu before any other city in the country, thus establishing a favourable platform for later cooperation between the brands and the city. The majority of brands debuting at Chengdu shopping malls this year came from the fashion accessory sector and F&B sector.

In terms of demand, thanks to their ability to raise capital, many internet-celebrity beverage and fi tness brands continued their expansion in Chengdu during 2019. Multiple e-commerce brands also quickened their pace of entry into Chengdu. Additionally, the market witnessed the rapid expansion of various coff ee brands in Q3/2019—ranging from well-known chain brands to New Retail brands.

ART EMPOWERS RETAILWith the increasing popularity of museums and art exhibitions, some shopping malls have started to include these attractions on their properties to meet consumer demand. Additionally, many museums are attempting to transform into broader cultural spaces by off ering more interactivity and creativity. Due to their large pedestrian volume and diverse functions, shopping malls have become a favourable platform for museums to develop closer ties to the community and daily life. Meanwhile, museums and art exhibitions can help absorb large leasing spaces in shopping malls while providing new and varied experiences, thus attracting a larger number of consumers. Representative cases

GRAPH 1: Total Retail Sales Of Consumer Goods In Chengdu, 2010 to Q3/2019

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Source Chengdu Bureau of Statistics, Savills Research

GRAPH 2: Supply, Take-up And Vacancy Rates, 2010 to Q3/2019

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Source Savills Research

Chengdu Retail

this year included “Renhe Nangu Art Gallery” opening at Renhe New Town and the VA Gallery setting up an art exhibition on the fourth fl oor of UFun.

GOVERNMENT MOVES TO BOOST SPORTS SECTORThe Chengdu government has recently announced plans to develop Chengdu into a world-renowned sports event city. In order to seize the opportunities that come with hosting large international events, the government has begun encouraging the development of the sports and fi tness sectors as well as promoting sectors involving interactive experiences, which should enlarge and strengthen the consumer pool for sports and fi tness experiences and goods. In the near future, this strategy will likely increase the number of creative enterprises in the sports and fi tness sector in Chengdu’s retail market, providing an important economic engine for the city’s retail growth. Moreover, when more consumers starting to pursue high-level sports and fi tness services, this sector will be further subdivided into more professional and innovative elements.

MAP 1: Chengdu Retail Submarket Future Supply, 2H/2019 to 2022

Source Savills Research

GRAPH 3: Core And Non-core Rental Index, 2010 to Q3/2019

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Source Savills Research

MARKET OUTLOOK About 220,000 sq m of new supply is expected to debut in Chengdu’s retail market by the end of 2019. Paradise Walk (Binjiang), located in the Jianshe Rd. submarket, has garnered signifi cant pre-launch attention. The project is expected to greatly enhance the retail environment in this submarket, while also intensifying competition among projects in the area. The city’s consumption power and constant leasing demands will keep overall market rents rising steadily.

From a demand perspective, the strategy for many brands is transforming from exclusively pursuing growth to concentrating on several key factors: improving service quality and the experience of their physical stores, enhancing product quality and combining their online and offl ine markets.

Chengdu is looking to improve and upgrade its retail environment through the ‘First-store’

economy plan, the promotion of the city’s nightlife and the exploration of new engines for

consumption growth.

= 10,000 sq m

City North

Jinsha-Guanghua

Shuangnan

City South

Dayuan

Financial City

City East

Jianshe Road

Chunxi Road-Yanshikou

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