Retailers battle to secure prime space in malls
By Cao Qian |
February 10, 2010, Wednesday
|
Print Edition
Print Edition
A DEVOUT coffee lover, Eason Wang, the 36-year-old manager at a local advertising company, finally managed to open his own cafe last month in Shanghai in partnership with a friend who shares the same dream of entrepreneurship.
Instead of choosing a low-profile address like other startups seeking to control costs, Wang and his partner decided to launch their business at the high end of town. They have secured a site on Nanjing Road W., one of the city's premier shopping streets.
"My partner and I both thought that location is very important for new businesses like ours due to the comparatively larger traffic flow of pedestrians in prime located shopping malls," said Wang, who has signed a three-year lease with the mall operator for his 150-square-meter cafe.
"Rents for retail and food and beverage spaces in downtown areas will probably remain stable or go upward over the long term, primarily due to robust demand and limited supply," Wang reasoned.
Wang and his partner are taking advantage of a small, high-end slice of Shanghai's booming retail market.
A new report issued by Savills Property Services (Shanghai) Co Ltd found that only about 5 percent of the 415,000 square meters of new retail space that came on the market last year was located in prime areas such as Nanjing Road. The rest was in more outlying areas to downtown and new emerging commercial hubs.
With the retail merchandise industry bubbling amid government stimulus programs aimed at consumers and expectations of millions of tourists in town later this year for World Expo Shanghai 2010, the retail property market is basking in upbeat forecasts with demand for prime retail space remaining particularly strong due to limited supply, according to industry analysts.
According to Albert Lau, executive director of Savills China, a major international property services company, the city's retail property market emerged as "one of the highlights of 2009 besides residential sales."
Average rents at prime shopping malls ended the year at 33.7 yuan (US$4.93) a day per square meter after recovering from a slump in the first half of 2009. The vacancy rate was 3.4 percent, according to Savills.
Demand for retail space in Shanghai was on the rise during the last quarter of 2009 as many retailers were either opening new stores or looking for new locations.
Faster economic growth has been driving demand for space among retailers targeting both luxury and mass markets, and the upcoming 2010 Expo has helped expedite their decision-making, industry analysts said.
Luxury stampede
Shoes and leather-goods chain Tod's and luxury fashion house Fendi both opened flagship stores in Plaza 66 on Nanjing Road W. late last year. A number of other international fashion retailers such as Bershka, OVS and 7 For All Mankind opened their first shops in Shanghai in 2009, with Abercrombie & Fitch, Miu Miu and Gap all planning debuts in the city this year.
Apple Inc is planning to open two directly operated stores in Shanghai this year for the first time. One will be located in the new Shanghai IFC center in Lujiazui, the financial district in Pudong, and the other will be housed in the recently renovated Hong Kong Plaza on Huaihai Road M. on the other side of the Huangpu River.
Analysts don't see many clouds on the horizon.
About 780,000 square meters of new retail space are scheduled to come onto the market this year, nearly double that in 2009, property services provider Colliers International predicted last month. Among that, only 20 percent will be located in prime areas, the company said.
"Expectations of a large number of tourists during the six months of Expo will no doubt be a strong catalyst for various brands to establish their footprints in the city," said Hingyin Lee, director of research and advisory for Colliers' East China operation. "At the same time, further expansion of existing brands will continue, particularly for prime retail space."
The cost of merchandising floor space is almost certain to go up.
"Rent in prime retail areas will increase moderately or even at a faster pace in 2010," said Lee with Colliers. "Luxury brands from abroad are capable of withstanding higher rents, while completion of upgrading in some prime retail areas such as Huaihai Road will also enable landlords to lift their rents."
One month after opening their coffee shop in that prime Nanjing Road location, Wang and his partner said they are starting to see growth in foot traffic through the door.
"We still believe our choice to launch our store in a prime location mall was the right decision, but it simply takes time for a new brand to be recognized and accepted by today's increasingly demanding customers," Wang said.
Instead of choosing a low-profile address like other startups seeking to control costs, Wang and his partner decided to launch their business at the high end of town. They have secured a site on Nanjing Road W., one of the city's premier shopping streets.
"My partner and I both thought that location is very important for new businesses like ours due to the comparatively larger traffic flow of pedestrians in prime located shopping malls," said Wang, who has signed a three-year lease with the mall operator for his 150-square-meter cafe.
"Rents for retail and food and beverage spaces in downtown areas will probably remain stable or go upward over the long term, primarily due to robust demand and limited supply," Wang reasoned.
Wang and his partner are taking advantage of a small, high-end slice of Shanghai's booming retail market.
A new report issued by Savills Property Services (Shanghai) Co Ltd found that only about 5 percent of the 415,000 square meters of new retail space that came on the market last year was located in prime areas such as Nanjing Road. The rest was in more outlying areas to downtown and new emerging commercial hubs.
With the retail merchandise industry bubbling amid government stimulus programs aimed at consumers and expectations of millions of tourists in town later this year for World Expo Shanghai 2010, the retail property market is basking in upbeat forecasts with demand for prime retail space remaining particularly strong due to limited supply, according to industry analysts.
According to Albert Lau, executive director of Savills China, a major international property services company, the city's retail property market emerged as "one of the highlights of 2009 besides residential sales."
Average rents at prime shopping malls ended the year at 33.7 yuan (US$4.93) a day per square meter after recovering from a slump in the first half of 2009. The vacancy rate was 3.4 percent, according to Savills.
Demand for retail space in Shanghai was on the rise during the last quarter of 2009 as many retailers were either opening new stores or looking for new locations.
Faster economic growth has been driving demand for space among retailers targeting both luxury and mass markets, and the upcoming 2010 Expo has helped expedite their decision-making, industry analysts said.
Luxury stampede
Shoes and leather-goods chain Tod's and luxury fashion house Fendi both opened flagship stores in Plaza 66 on Nanjing Road W. late last year. A number of other international fashion retailers such as Bershka, OVS and 7 For All Mankind opened their first shops in Shanghai in 2009, with Abercrombie & Fitch, Miu Miu and Gap all planning debuts in the city this year.
Apple Inc is planning to open two directly operated stores in Shanghai this year for the first time. One will be located in the new Shanghai IFC center in Lujiazui, the financial district in Pudong, and the other will be housed in the recently renovated Hong Kong Plaza on Huaihai Road M. on the other side of the Huangpu River.
Analysts don't see many clouds on the horizon.
About 780,000 square meters of new retail space are scheduled to come onto the market this year, nearly double that in 2009, property services provider Colliers International predicted last month. Among that, only 20 percent will be located in prime areas, the company said.
"Expectations of a large number of tourists during the six months of Expo will no doubt be a strong catalyst for various brands to establish their footprints in the city," said Hingyin Lee, director of research and advisory for Colliers' East China operation. "At the same time, further expansion of existing brands will continue, particularly for prime retail space."
The cost of merchandising floor space is almost certain to go up.
"Rent in prime retail areas will increase moderately or even at a faster pace in 2010," said Lee with Colliers. "Luxury brands from abroad are capable of withstanding higher rents, while completion of upgrading in some prime retail areas such as Huaihai Road will also enable landlords to lift their rents."
One month after opening their coffee shop in that prime Nanjing Road location, Wang and his partner said they are starting to see growth in foot traffic through the door.
"We still believe our choice to launch our store in a prime location mall was the right decision, but it simply takes time for a new brand to be recognized and accepted by today's increasingly demanding customers," Wang said.
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