Savills China Shanghai Retail Sector Briefing indicates rising sale figures in Q1 2018 renewed retailer confidence.
Shanghai's retail market enjoyed a respite from new supply in Q1 2018 while rising sales figures gave retailers renewed confidence.
Savills report at a glance:
James Macdonald of Savills China says, “Growing investment from online players in offline markets is expected to further shake up the market to the benefit of consumers.”
Market commentary
Shanghai’s retail market continued its recovery in Q1 2018 with a handful of retailers recording YoY growth in sales of 10.4% over the two-week Spring Festival holiday. Large shopping malls also reported satisfactory sales performances over the same period.
Overall first floor rents increased by 0.3% in Q1 2018 to RMB27.5sq.m. per day. Pudong rents increased by 0.7% QoQ, compared to 0.2% in Puxi. Nevertheless, the district’s rents still remain 30% lower than the average level for Puxi.
Citywide vacancy rates increased 0.1 ppt to 6.5%. Lease expirations in a few regional projects in Pudong resulted in vacancy rates rising 0.1 ppt to 4.8%. Puxi vacancy rates remain at 6.8%.
Source: Savills China - Shanghai Retail Sector Briefing Q1 2018 Report
Puxi
Nanjing Road (E) was one of the best performing retail areas in Q1 2018 with vacancy rates falling to 9.4%, the first time rates have dropped below 10% in the last three years.
Vacancy rates in New Jiangwan Town in Yangpu District fell 3.3 ppts QoQ to 16.8%. Footfall in the area’s leading project, U Fun, continued to improve.
Sichuan Road (N) vacancy rates increased 2.8 ppts to 12.4% in Q1 2018.
Source: Savills China - Shanghai Retail Sector Briefing Q1 2018 Report
Pudong
Lease expiries and tenant adjustment in Zhangjiang led to vacancy rates rising by 1.2 ppts in Q1 2018. Rental growth in the area is expected to outperform the whole of Pudong thanks to the growing popularity and maturity of the area.
Huamu’s vacancy rate fell to a historical low of 2.9% in Q1 2018.
Pudong vacancy rates have moderated to 4.5% over the last six months, but with a number of large malls scheduled to open in the remainder of 2018, this figure is expected to increase by 2.0 to 3.0 ppts, to a level similar to Puxi’s. As supply stabilises to roughly 200,000sq.m. per annum for the period 2019 to 2021, vacancy rates are expected to trend down again in 2019.
In February, Pudong saw its largest land plot deal transacted in over a decade. The Longyang Road plot has a site area of 250,000sq.m. and an aboveground GFA of 1.38 million sq.m., of which office will account for 1.04 million sq.m. and retail for 270,000sq.m. The plot is located in between Zhangjiang and Huamu sub-city centre and connects with four metro lines and the Shanghai Maglev.
Click here to view Savills China Shanghai Retail Sector Briefing Q1 2018 Report.
For more information or to discuss the report email James Macdonald of Savills China via the contact details listed below.
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