APPD Market Report Article


August 26, 2022

Mi Yang, Head of Research, North China


RMB 786


The latest outbreak in May drastically disrupts the market

  • The disruption caused by the latest COVID-19 outbreak hit the retail market heavily, with overall retail sales growth declining by 26% y-o-y in May. F&B tenants were among the hardest hit as overall retail sales from the F&B sector tumbled by nearly 55% y-o-y in May. Driven by the rising operational pressure, more than 60% of surveyed closed stores were F&B brands.
  • Shopping malls had resumed operations after the suspension of retail activity in May; however, the recovery was slow, with top malls recovering less than 60% of the traffic flow before the outbreak. Meanwhile, fast fashion brands continued to shrink their offline presence amid a challenging offline market. For example, Selected announced that it will close all offline stores by the end of July.

Yaojiayuan MixC opens ahead of the COVID-19 outbreak

  • Yaojiayuan MixC, renovated by China Resources, opened in late April with a nearly full commitment rate. The project targeted family customers in the nearby region through its nearly 30 children-oriented brands, such as Living Young and Kidsland, differentiating itself from nearby popular Chaoyang Joy City which targeted young customers.
  • Chang’an Mills Mall, located in Shougang Park which hosted the Beijing Winter Olympics, opened in 2Q22. The shopping centre attracted 14 brands for their debut appearance in West Beijing, including NEV brands NIO, Arcfox, and GAC Aion. This building is expected to significantly increase the quality of retail in Suburban Shijingshan area and to further boost spending in Shijingshan District.

Rental growth turns negative following a sharp drop in demand

  • The recent outbreak severely impacted leasing activity as overall leasing demand has been largely subdued. Landlords lowered their rental expectations and offered rent concessions on new leases under increasing vacancy pressure, while providing support to current tenants by lowering rents and offering rent-free periods in order to stabilise their buildings.
  • The drastic drop in leasing demand put downward pressure on rental growth. Urban rents recorded a moderate decline, registering -0.7% q-o-q growth (-1.1% y-o-y), while the suburban submarket recorded a sharper decline, recording -1.3% q-o-q growth (-3.5% y-o-y).

Outlook: Demand to remain weak; renovations to drive urban supply

  • Considering the uncertainty surrounding a possible COVID-19 resurgence, many brands have paused or cancelled expansion plans that were previously planned for the year. A continuous decline in overall leasing demand is expected throughout the second half of 2022. Meanwhile, as COVID-19 control measures remain strict, further store withdrawals are likely amid increasing financial pressure.
  • The government has continued to promote urban renewal progress by working with experienced operators and developers, encouraging them to participate in urban renewal projects. In the urban submarket, renovation projects are expected to drive up supply for the year as over 60% of upcoming projects are renovations, which will bring the expected total of urban supply to over 350,000 sqm for 2022.

Note: Beijing Retail refers to Beijing's Urban retail market.

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