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Retail property market beset by many challenges
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The retail property market in Shanghai in 2013 was not easy for many landlords. The market was facing more challenges than ever before, from slowing economic growth, to rising supply levels and competition for tenants, as well as competition with online stores and overseas shopping for shoppers’ money, said a latest quarterly report released by Savills.
Around the city, eight projects were launched last year with a total retail gross floor area of 717,600 square meters, an increase of 3.8 percent from 2012, according to data released by Savills China.
One mall, Global Harbor in Putuo District, for instance, accounted for 44.6 percent of this space. The city’s total shopping mall stock therefore rose 13 percent year on year to 6.2 million square meters by the end of 2013.
For prime retail property stock, it climbed 15.8 percent year on year to 1.5 million square meters, mainly boosted by the launch of Jing An Kerry Center on Nanjing Road W. and iapm on Huaihai Road M.
“Average rents in primary, secondary and emerging areas edged up by 0.5 percent, 0.2 percent and 0.1 percent quarter on quarter, respectively, during the last three months of 2013, while annual growth was 2.2 percent, 0.7 percent and 0.5 percent, the lowest levels recorded since 2010,” said James Macdonald, head of Savills China research.
Vacancy rates at primary retail properties, meanwhile, increased by 1 percentage point quarter on quarter between October and December to 4.1 percent, according to Savills data.
Notably, four of five primary areas saw an increase in vacancy rates, with only Xujiahui witnessing a fall in rates of 1 percentage point after the successful re-subdivision of portions of both Metro City and Grand Gateway.
“Since 2009, Xujiahui has been the only primary retail area in the city that has been able to keep its vacancy rate below 1.5 percent,” noted Macdonald. “The area has diverse tenant positioning and target consumer groups, with projects feeding off and supporting each other rather than going head to head in fierce competition for every retailer and shopper.
“Despite slow leasing activity and only moderate growth in rents, there still were quite a number of leasing enquiries in 2013, although negotiations for new store locations, especially in recently completed projects, are taking longer and longer with mainstream international retailers remaining cautious on opening new stores,” Macdonald said.
“In the future, a two-tier market will start to emerge, with well-managed malls in prime locations continuing to attract tenants and shoppers, while many malls in emerging locations, apart from the best, finding it difficult to attract suitable retailers and shopper footfall.”
For this year, Shanghai is going to see 11 projects with a total retail gross floor area of 1 million square meters come into the market with the former World Expo site in the Pudong New Area and the Middle Ring Road area in Putuo District each seeing more than 200,000 square meters of new supply.
In 2015 and 2016, the new supply of retail space is also expected to exceed 1 million square meters per annum in Shanghai, Savills data showed.
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