APPD Market Report Article


May 31, 2022


RMB 868


The market sees positive signals despite the temporary lockdown

  • The government imposed a seven-day lockdown in mid-March as Omicron cases jumped in Shenzhen, halting offline retail activity in the city. All production and business activities, as well as public transport, were suspended, excluding those providing public services such as food, water, and electricity to guarantee residents’ basic needs.
  • Currently, shopping malls have resumed operation but leasing transactions were mostly made before the Spring Festival. It was observed that high-profile retailers penetrated Shenzhen’s retail market. For example, Galeries Lafayette, with a total area of 4,500 sqm, entered UpperHills, while Louis Vuitton, Dior, and Yves Saint Laurent all set up new multi-storey stores at MixC Phase I.

Overall vacancy rate remains stable in 1Q22

  • With no new completion in the quarter, the total stock of Shenzhen’s prime retail market remained at around 6.7 million sqm.
  • To prevent Omicron transmission, the government required that places, such as education centres, temporarily close as of mid-February. A few tenants thereby encountered a cashflow crisis, resulting in increased vacancy in malls targeting young families. But thankfully, such negative impacts were offset by MixC World which was nearly fully occupied after finishing its large-scale tenant adjustment.

Rents edge down with limited transactions recorded

  • The COVID-19 flare-up nationwide, followed by a foreseeable decrease in leasing demand, has gradually softened landlords’ strong stance on their rental level, while a few have already cut the rents to avoid worsening occupancy. To conclude, overall rents went down by 0.3% q-o-q on a chain-linked basis in the quarter.
  • In the quarter, Wongtee International published a tender invitation for its core retail asset namely Wongtee Plaza in Futian CBD. Despite the high asking price of RMB 7.5 billion, this mall has aroused interest among a handful of investors who wish to develop a new market in the Greater Bay Area.

Outlook: Retailers to examine their expansion plans in the short term

  • Although the outbreak will not fundamentally change Shenzhen’s retail market, it may exert an instant impact on leasing demand since retailers, especially those which are based in Shanghai, are unable to conduct site inspections. As a result, a drop in overall leasing demand is expected to weigh on malls citywide in the short term.
  • New supply, including several urban renewal projects, is expected to exceed 800,000 sqm in the next 12 months, and thus, overall vacancy rate may increase moderately. Overall rents are likely to lose some growth momentum as overall leasing demand declines.

Note: Shenzhen Retail refers to Shenzhen's prime shopping mall market.

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