APPD Market Report Article

Shanghai

May 31, 2022

4.4%

RMB 51

Growth
Slowing

Leasing activities moderate in March amid local outbreaks

  • Domestic consumption demand and overall retail leasing activities remained stable in the first two months of 2022, but faced disruptions in March due to new outbreaks of Covid-19 in Shanghai. As a result, Shanghai’s urban area saw 46,700 sqm of net take-up in 1Q22, decreasing from 95,000 sqm in 1Q21.
  • New take-up was mainly contributed by coffee, tea, and dessert shops, along with new energy vehicle showrooms, international skin care and perfume brands, and designer fashion brands. In addition, new retail formats that combined sales and exhibition space for multiple brands also showed notable expansion.

Decentralised vacancy further drops amid lack of new supply

  • No new supply was delivered in the prime or decentralised markets in the quarter. Some projects that had scheduled March openings delayed in the face of local outbreaks.
  • Prime vacancy remained flat at 9.0% q-o-q. Decentralised vacancy fell from 9.6% to 9.2% q-o-q in 1Q22, mainly due to improved leasing progress in projects that opened in 4Q21.

Citywide rent remains largely stable

  • With many deals closed by the end of 2021 and new deals for 2022 still under negotiation, there was limited movement in rents in 1Q22. Prime ground floor rents edged up 0.1% q-o-q to RMB 51.1 per sqm per day, while decentralized rents were largely flat at RMB 19.2.
  • However, as pandemic containment measures continue to affect retail businesses, pressure on rents is increasing amid slower leasing momentum.

Outlook: Decentralised malls continue to feel pressure

  • Pandemic containment measures will continue to affect retail businesses over the next few months. Although retailers are expected to expand at a slower pace while the outbreak is contained, long-term expansion plans are not expected to be affected.
  • We expect five projects in prime areas and fourteen in decentralised areas to open in 2022, though more delays are likely over the next few quarters. Prime projects will be mostly stable, while decentralised areas will continue to see pressure in terms of vacancy and rents due to slower leasing momentum and large supply in the pipeline.

Note: Shanghai Retail refers to Shanghai's overall prime and decentralised retail markets.

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