shanghai – april 2021 market in retail minutes...shanghai – april 2021 demand for authentic...
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Savills Research
RetailShanghai – April 2021
Demand for authentic experiences drove growth in services.
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 600 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 It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent.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.
Nicky ZhuSenior DirectorShanghai+8621 6391 [email protected]
James MacdonaldSenior DirectorChina+8621 6391 [email protected]
RESEARCH
STRATEGIC ADVISORY SERVICES
Please contact us for further information
Savills team
“Despite improving occupancy rates, citywide vacancy rates are likely to hover around 10% in the short-to mid-term as delayed supply eventually launches and increases market competition.” JAMES MACDONALD, SAVILLS RESEARCH
• Retail sales grew 48.3% YoY in the first two months of 2021, as the market shakes off the impact of COVID-19.
• No new projects were launched onto the market in Q1/2021, keeping the total shopping mall and department store stock within the Outer Ring Road at 13.8 million sq m.
• Citywide vacancy rates fell 0.7 of a percentage point (ppt) in Q1/2021 to 9.5%.
• Prime retail area vacancy rates increased 0.4 of a ppt
quarter-on-quarter (QoQ) to 8.4%, and non-prime retail area vacancy rates fell 1.0 ppt QoQ to 9.8%.
• First-floor rents increased 0.1% in Q1/2021 to an average of
RMB26.3 per sq m per day, the first increase in a year. • International brands still favour Shanghai’s retail market,
with several luxury brands opening new stores during the quarter.
• Service brands accounted for 38.9% of newly leased space,
mainly contributed from the increasing proportion of children-related facilities, leisure and entertainment tenants.
• Several shopping malls, including Lalaport Jinqiao, Greenland Being Fun Putuo and Raffles City The Bund, are expected to open in Q2/2021.
Aileen ZhongSenior DirectorShanghai+8621 6391 [email protected]
Joey ChioSenior DirectorShanghai+8621 6391 [email protected]
RETAIL
First rental raise in a year Elaine ChanSenior DirectorShanghai+8621 6391 [email protected]
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SUPPLY AND DEMANDRetail sales grew 48.3% YoY in the first two months of 2021, as the market shakes off the impact of COVID-19.
No new projects were launched onto the market in Q1/2021, with the total shopping mall and department store stock within the Outer Ring Road remaining at 13.8 million sq m.
International brands still favour Shanghai’s retail market. Descente, a Japanese sports brand, plans to open two 800+ sq m flagship stores in Xintiandi and Super Brand Mall, while Jordan entered IFC Mall and The MixC, and Hollister restarted their expansion, identifying sites in Century Link and Qibao Vanke Mall. Luxury brands Dolce & Gabbana opened new stores in HKRI Taikoo Hui and ITC Mall, while Burberry replaced Prada in Plaza 66—spanning L1 to L3—and Balenciaga opened new stores in both iapm and Plaza 66.
Service brands accounted for 38.9% of newly-leased space, up 11.6 ppts QoQ, with demand predominantly coming from children-related facilities, leisure and entertainment tenants. Indoor theme parks were also snapping up vacant space, such as Neobio and Alpha Land, as well as winter theme parks such as Ice World, Himalayan Ice and Snow Paradise. Now that life has returned almost to normal, demand for authentic, real-world experiences will continue to support the growth of service tenants.
RENTS AND VACANCY RATESShopping mall vacancy rates fell by 0.7 of a ppt in Q1/2021 to 9.5%, up 1.0 ppt YoY. Prime retail area vacancy rates meanwhile
increased 0.4 of a ppt QoQ to 8.4%, and non-prime retail area vacancy rates fell 1.0 ppt QoQ to 9.8%. Vacancy rates fell for two consecutive quarters in over 70% of the retail precincts monitored, and, among them, Qibao and Caoyang have seen their vacancy rates fall below pre-COVID-19 levels.
First-floor rents grew 0.1% in Q1/2021 to an average of RMB26.3 per sq m per day, their first growth in a year. Prime retail area rents increased 0.1% QoQ to an average of RMB48.4 per sq m per day, while non-prime area rents remained unchanged at an average of RMB16.2 per sq m per day. First-floor rents are expected to record moderate growth for the remainder of 2021, though project performance will be highly dependent on the capability of asset management teams and the ability to attract fresh brands and concepts.
MARKET OUTLOOK14 projects are expected to launch in the rest of 2021, bringing 1.5 million sq m of new supply to the market. Q2/2021 is expected to see the opening of Lalaport Jinqiao, Greenland Being Fun Putuo and Raffles City The Bund. Even projects located in non-prime retail areas will be trying their best to attract iconic eye-catching stores and premium brands to create a buzz upon opening and drive sustained footfall. Citywide vacancy rates are likely to hover around 10% in the short-to mid-term as delayed supply eventually launches and increases market competition.
Source Savills Research
GRAPH 1: Shopping Mall Supply Within The Outer Ring Road, 2016 to Q1/2021
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2016 2017 2018 2019 2020 Q1/2021
sq m
GRAPH 2: Citywide Vacancy Rates, Q2/2016 to Q1/2021
Source Savills Research
0%
2%
4%
6%
8%
10%
12%
14%
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
2016 2017 2018 2019 2020 2021
Citywide
GRAPH 3: Citywide Rental Indices, Q2/2016 to Q1/2021
Source Savills Research
90
95
100
105
110
115
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
2016 2017 2018 2019 2020 2021
Q1/
20
13=
100
Citywide
Retail
Source Savills Research
TENANT CATEGORY PROJECT AREA GLA (SQ M)
Haoledi (好乐迪)
Leisure & Entertainment
Life Hub @Jinqiao Jinqiao 2,300
JordanSports & Outdoors
IFC Mall Little Lujiazui 1,100
Muji Home & Lifestyle The Hub HTH 1,000
Hollister Fashion Qibao Vanke Mall Qibao 370
TABLE 1: Selected Leasing Transactions In Q1/2021