APPD Market Report Article

Guangzhou

December 1, 2021

0.4%

RMB 310.5

Rents
Stable

Luxury brands are keen on expanding in the core area

  • Although the leasing demand was modest in this quarter, consumption upgrade became the mainstream, supporting retail sales growth. Several retailers focused on their flagship stores in core areas and focused on creating a unique offline experience. For example, Lego opened its largest flagship store at Grandview Mall, blending unique digital and physical features with its classic toy bricks.
  • Luxury brands were keen on expanding in the core area, however, due to limited leasable space for new boutiques in Taikoo Hui, Moynat and Balenciaga took the atrium space there, setting up their first shops in Guangzhou. A few high-end cosmetics and skincare brands opened new stores in Taikoo Hui and extended their demand to K11 in Zhujiang New Town due to its affluent catchment.

Two urban malls open in 3Q21

  • Two projects, namely ICC Mall and Mayland M·LIVE Plaza West, opened in 3Q21. Both projects achieved high occupancy rates of above 95% upon their grand openings, while devoting more space to entertainment, F&B and personal service tenants than to traditional retail.
  • Urban vacancy rate went up as a result of increasing vacancy pressure of those aged malls in the traditional shopping districts. Suburban vacancy rate slightly decreased as a few well-managed malls by experienced developers in Baiyun District were able to fill up some vacant space.

Developers seize urban gentrification opportunities in Guangzhou

  • Urban rents remained stable as a few mid-to-high-end malls in Tianhe North and Zhujiang New Town were able to bargain for higher rents, even though some aged malls in traditional shopping districts exerted downward pressure. Suburban rents decreased as the rents of malls in Panyu and Zengcheng still lacked growth momentum due to stiffer competition between malls with similar offerings.
  • Swire Properties and Pearl River Enterprises Group signed cooperation LOI to jointly develop a commercial project, as part of an urban gentrification plan in Julong Bay Area, located in Liwan District. It is expected that Swire Properties will leverage its vast experience in operating high-end retail projects to develop a world-class commercial landmark.

Outlook: Suburban malls with similar positioning will still struggle

  • Leasing demand will continue to show regional divides between urban and suburban malls. Well-managed malls in core areas will remain popular among upscale retailers. On the other hand, malls in districts with relatively low consumption levels, such as Panyu and Zengcheng, will still struggle to fill up vacant space due to fierce competition.
  • Around 196,000 sqm of new supply is expected to enter the market in the next 12 months. Due to limited supply in the near term, both urban and suburban vacancy pressure will likely ease gradually, however, the rental growth will still face headwinds as largely the leasing demand is expected to be among entertainment and personal service tenants with relatively lower rental affordability.

Note: Guangzhou Retail refers to Guangzhou's overall prime retail market.

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