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Average retail rent posts 1st decline

By Cao Qian | April 9, 2009, Thursday | Print Edition

THE average rent of Shanghai's prime retail space suffered its first setback in nine years during the last quarter as retailers started to review their expansion plans amid a slowing growth in retail sales.

Ground floor retail space in the city's prime shopping centers saw the average rent decline 1.4 percent quarter on quarter to 46.9 yuan (US$6.80) per square meter per day, the first drop since 1999, Jones Lang LaSalle, a major real estate services provider, said yesterday.

"After several years of steady rent increases, the average rent at the city's prime retail spaces has reached a peak,'' said Michael Klibaner, head of research at Jones Lang LaSalle's Shanghai operations. "We've noticed that quite a lot of retailers, many from overseas, have already scaled back their original aggressive expansion plans over the last three to six months while many are also paying more attention to the profitability of individual stores.''

Across the city, the vacancy rate of the sector fell 1.9 percentage points to 4.9 percent in the first quarter.

In fact, local landlords are now facing increasing pressure to attract tenants amid falling demand and slowing retail growth, industry analysts said. Some shopping center landlords with vacant space on the upper floors are now choosing to sign leases with large tenants who typically pay discounted rent in the hope that they can help raise cash flow for the landlords and lure customers.

Examples included a major gym operator who leased space on the sixth and seventh floors of a prime shopping mall on Huaihai Road M. and a major sports goods chain which took up space in a prime retail outlet on Nanjing Road E.

Retail sales rose 10.2 percent year on year to 39.78 billion yuan in February in the city, compared to 20.1 percent in January, the Shanghai Statistics Bureau said.

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