Net take-up turns positive thanks to the recovery in prime areas

• Shanghai’s retail leasing momentum demonstrated a slight improvement in Q2 2024, with overall net take-up reaching approximately 2,300 sqm. This is mainly attributed to the recovery in leasing demand, particularly within the prime areas.
• New leases came primarily from sportswear, affordable dining, bakery and beverage, fast fashion, local womenswear and discount stores. Notably, leading sports brands continued to expand, while many niche brands made their debut in Shanghai.

One project opens in Shanghai’s decentralised market in Q2 2024

• One project opened in Shanghai’s decentralised market, Xuhui Vanke Plaza, delivering a retail GFA of 90,000 sqm to the South Railway Station submarket.
• The prime market vacancy rate saw a slight decrease to 9.2%, while the decentralised market vacancy rate rose to 13.2%. Mall performance showed further divergence, with regional malls showing greater resilience.

Rents continue to fall but the decline has decelerated

• Average ground floor rents in the prime area fell 0.4% q-o-q, while decentralised rents were down 0.9% in Q2 2024. Challenges persist for retail projects due to intense competition and a decrease in brands’ rent affordability.
• In the investment market, yields in both the prime and decentralised markets decompressed slightly as investors were still cautious about the retail property market’s challenges.

Outlook: Large supply to add pressure to the decentralised area

• A large supply wave will impact the market in 2024, resulting in increased pressure. Shanghai’s retail market is likely to face persistent challenges concerning rents and occupancy, with the performance gap between various projects expected to widen.
• We anticipate growth in affordable dining, domestic fashion brands and discount store sales as consumers seek value-for-money products. Additionally, we expect more projects to combine retail spaces with culture, art and nature.