savills.com.cn/research 01

Briefing Retail sector February 2016

Savills World Research Beijing

Retail sales increased 7.3% year-on-year (YoY) to RMB1033.8 billion in 2015. Meanwhile, online retail sales continued to post aggressive growth, registering 40.2% over the same period.

One new project entered the market in the fourth quarter of 2015, with Carrefour Siyuan Shopping Mall (家乐福四元广场购物中心) in the Wangjing district adding 70,000 sq m of retail GFA to the market. As a result, the year’s total supply reached 570,000 sq m, increasing overall stock to around 10.41 million sq m.

Increasing pressure from online competition and overseas buying witnessed shopping mall city-wide occupancy rates decrease 0.6 of a percentage point (ppt) quarter-on-quarter (QoQ) to 94.8% by the end of Q4/2015.

Beijing shopping mall first-floor rents held stable at RMB895.8 per sq m per month.

The market will continue to decentralise in 1H/2016, as the majority of new supply scheduled to launch is to be located in suburban

“Targeted leasing strategies are becoming essential for landlords looking to improve mall performance.” Jack Xiong, Savills Research & Consultancy

Image: Carrefour Siyuan Shopping Mall, Chaoyang district

SUMMARYIncreasing pressure from online competition and overseas buying witnessed shopping mall city-wide occupancy rates decrease 0.6 of a percentage point (ppt) quarter-on-quarter (QoQ) to 94.8% by the end of Q4/2015. Meanwhile, rental growth continued to be constrained.

areas. The anticipated vacant space in the newly launched projects is expected to see city-wide occupancy rates witness a marginal decline.

02

Briefing | Beijing retail sector February 2016

Economic overviewOverall retail sales increased 7.3% YoY to RMB1033.8 billion in 2015. Meanwhile, online retail sales continued to post aggressive growth, registering 40.2% over the same period. Urban disposable incomes per capita grew 8.9% YoY by the end of 2015, while expenditure per capita registered growth of 8.7% YoY over the same period.

Supply and stockThe fourth quarter of 2015 was relatively cool in terms of supply, with

TABLE 1

New Supply in Q4/2015

Source: Savills Research & Consultancy

ProjectCarrefour Siyuan Shopping Mall

(家乐福四元广场购物中心)

Location Wangjing

Launch time November 2015

Developer Carrefour

Retail type Shopping mall

Retail GFA(sq m) 70,000

Tenant mixClothing, Accessories, F&B, Children’s,

Leisure, Lifestyle

Anchor tenants Carrefour Supermarket, Decathlon

Major tenants C&A, ONLY, VERA MODA, Uniqlo

Source: Beijing Statistics Bureau, Savills Research & Consultancy

GRAPH 1

Retail sales, Jan 2010 – Dec 2015

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

-60

-40

-20

0

20

40

60

80

100

Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

RM

B b

illio

n

Retail sales (LHS) Retail sales nominal YoY growth rate (RHS)F&B revenue YoY growth rate (RHS)

only one new project entering the market in late November – Carrefour Siyuan Shopping Mall (家乐福四元广场购物中心) located in the Wangjing area. Spread over an area of 70,000 sq m, the project is the largest store opened by the French retailer in Asia. Strong pre-commitment rates saw the project secure a remarkable 95% occupancy rate on the day of its launch.

Demand and occupancy ratesF&B retailers saw the most activity across all districts of Beijing in Q4/2015. Major leasing deals included:

- Crystal Jade launched a new store in Taikooli Sanlitun South Zone (三里屯太古里南区) in the Sanlitun district.

- Paris Baguette underwent renovations and recommitted to a store in The Place (世贸天阶) in the CBD district.

- Nice Meeting You committed to a new outlet in Joycity (西单大悦城) in the Xidan district.

Fast-fashion and mid-end luxury brands continued to both enter and expand in the market, looking to further capture market share. Transactions of the quarter included:

- Trendiano launched a new store in U-Town Lifestyle Center (优唐生活广场) in the Chaoyangmen district.- Uniqlo launched a new store in the newly launched Carrefour Siyuan Shopping Mall (家乐福四元广场购物中心) in the Wangjing district.

- Vera Moda launched a new outlet in the Carrefour Siyuan Shopping Mall (家乐福四元广场购物中心) in the Wangjing district.

With landlords looking to attract footfall to their projects, children’s retailers continued to aggressively expand in the market. Transactions of the quarter included:

- Toys "R" Us launched a new store in Beijing APM Shopping Mall (北京APM) in Wangfujing district.

- Little Star Brands Group launched a store in Parkview Green (侨福芳草地) in CBD district.

Shopping mall city-wide occupancy rates decreased 0.6 of a ppt QoQ

to 94.8% by the end of Q4/2015, a decline of 0.3% YoY.

The majority of projects in prime locations registered positive occupancy rates during the period, and as a result overall prime locations achieved an average of 95%. However, it is worth noting that the Wangfujing district experienced a significant dip, with occupancy rates down 4.7% YoY to 91.8%. This decline has been largely fuelled by the poor performance of some traditional retailers in the area, which has seen landlords remove them from their projects as they undertake branding readjustment strategies.

RentsGiven the slow economic environment, the majority of the quarter’s demand continued to stem from F&B and lifestyle retailers with relatively lower rental budgets. Consequently, Beijing shopping mall rents faced downwards pressure.

Beijing shopping mall first-floor rents held stable at RMB895.8 per sq m per month. By catchment, non-prime market rents marginally declined, down 1.1% YoY to RMB626 per sq m per month, while prime market rents held stable at RMB1,187 per sq m per month.

Market outlook1H/2016 is scheduled to see four more mid-to-high-end shopping mall projects launched onto the market, contributing a total retail GFA of approximately 354,000 sq m. As the majority of the supply will be located in suburban areas such as Daxing and Pinggu, the market will continue to decentralise. The anticipated vacant space in the newly launched projects is expected to see city-wide occupancy rates witness a marginal decline.

Fierce competition in the retail market sees success derived from more than just having a good project location. As a result, landlords are expected to continue exploring branding readjustment strategies in the hopes of boosting footfall. Lifestyle retailers are anticipated to be a big player in this category, however their general lower rental affordability will see landlords pressured to extend rental incentives.

savills.com.cn/research 03

February 2016Briefing | Beijing retail sector

Please contact us for further information

Savills Research Savills Retail Savills Research & Consultancy

Savills plcSavills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 700 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East.

This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.

James MacdonaldDirector, China+8621 6391 6688james.macdonald@savills.com.cn

Jack XiongDirector+8610 5925 2042jack.xiong@savills.com.cn

Anthony McQuadeSenior National Director, Head of Agency, North China+8610 5925 2002anthony.mcquade@savills.com.cn

Melissa OngDirector+8610 5925 2086melissa.ong@savills.com.cn

Savills Northern China

Source: Savills Research & Consultancy

GRAPH 2

Major retail area vacancy rates and rents, Q4/2015RentVacChart

Page 1

0%

5%

10%

15%

20%

25%

30%

35%

0

500

1000

1500

2000

2500

3000

3500

CBD Lufthansa Sanlitun Dongzhimen ZGC Xidan WFJ

Q4/15 Rent (LHS) Q4/15 Vacancy rate (RHS)

RM

B p

er s

q m

per

mon

th

Average rent

Source: Savills Research & Consultancy

GRAPH 3

First-floor shopping mall rental index, Q1/2008–Q4/2015

-5%

0%

5%

10%

15%

20%

90

100

110

120

130

140

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2008 2009 2010 2011 2012 2013 2014 2015

Q1/

2008

= 1

00

Overall QoQ YoY

TABLE 2

Future project focus, 2016

Source: Savills Research & Consultancy

ProjectBHG Mall

(华联平谷购物中心)

Location Pinggu

Estimated opening date

January 2016

Landlord BHG

Retail type Shopping mall

Retail GFA (sq m) 59,000

Anchor tenants BHG Supermarket, Jackie Chan Cinema