APPD Market Report Article

Shanghai

December 1, 2021

5.7%

RMB 51.2

Rents
Rising

Retail leasing momentum accelerates

  • Shanghai unveiled a three-year plan to boost its consumer market through cultivating home-grown brands and attracting more foreign brands to debut first stores in the city. Urban net take-up accelerated to 524,600 sqm thanks to further leasing recovery and strong performance in new leading decentralised malls.
  • Luxury brands accelerated their expansion with a focus on flagship stores, new concept stores, and pop-up stores. More high-end skincare, perfume, and make-up brands debuted their first stores in Shanghai. The quarter’s improved leasing also was driven by auto showrooms, experiential indoor sports, chain restaurants, and coffee and dessert shops.

Overall vacancy continues to drop

  • Three decentralised malls opened in 3Q21, adding a total retail GFA of 421,000 sqm. CapitaLand’s Raffles City The Bund and Shui On’s The Hall of the Sun opened in Hongkou District, both achieving high opening rates. Developed by Swire and Lujiazui Group, TaiKoo Li Qiantan launched at the quarter’s end with a concentration of top luxury brands.
  • Prime vacancy dipped 0.3 ppts q-o-q to 9.7%, while decentralised vacancy fell 1.0 ppts to 9.3% as leasing recovery accelerated in existing malls and new projects debuted with above-average occupancy.

Prime rental growth outpaces growth in decentralised areas

  • Prime ground floor rents grew 2.6% q-o-q to RMB 51.2 per sqm per day due to luxury brands’ active expansion and exceptional sales performance in high-end malls. Decentralised rents edged up by 0.9% q-o-q as most malls still faced supply pressure while some leading regional malls continued to outperform.
  • Hysan acquired City Link tower in Jing’an District from CK Asset for RMB 3.5 billion. The newly completed project has 50,000 sqm of ready-to-rent office space and 18,000 sqm of retail space, and transacted at approximately RMB 51,471 per sqm. Hysan will conduct asset enhancement work on the retail space, with completion expected by mid-2023.

Outlook: High-end and leading regional malls to outperform

  • In the prime area, we expect rents in luxury-positioned malls to continue to outperform. Other projects will seize opportunities to upgrade, either through renovation, repositioning, or tenant adjustment.
  • In decentralised areas, we expect performance to further diverge between leading regional malls and others. With another eight malls expected to open in 4Q21, decentralised vacancy will face further upward pressure.

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

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