Strong increase in net absorption indicates improving leasing activity

• Shanghai’s retail leasing momentum further improved, with overall net take-up reaching 343,500 sqm. This growth can largely be attributed to the high pre-leasing rates in new projects and proactive measures undertaken by landlords to address vacancies in existing malls.
• New leases predominantly came from affordable dining, sportswear, streetwear brands, local designer brands and collectible toy stores. Moreover, a shift towards a more rational consumer behaviour aided brands that offer ‘value for money’ products to gain popularity.

Four new projects enter the decentralised market

• Four new projects opened in Q3 2024 in the Decentralised area, delivering a combined retail GFA of 337,000 sqm. The new projects achieved smooth pre-leasing progress with commitment rates ranging from 70% to 100%. No new supply was recorded in the Prime area in Q3.
• Vacancy rates for the Prime market declined from 9.2% to 8.0%, and from 13.2% to 12.7% for the Decentralised market as landlords offered increased flexibility to attract and retain brands.

Average rent sees further correction

• Landlords continued to prioritise occupancy by offering more rental concessions. The average ground floor rent in the Prime area declined 1.3% q-o-q to RMB 46.1 per sqm per day in Q3 2024. Decentralised rents dropped 2.0% q-o-q to RMB 16.3 per sqm per day in Q3 2024.
• Investors show greater interest in well-performing regional malls in suburban areas. GIC acquired a 48% stake in Nanxiang Incity Mega Mall and Songjiang Incity. Market yields in both the Prime and Decentralised markets continue to decompress.

Outlook: Large supply to add pressure to Decentralised area

• As the younger generation becomes the main consumer group for many popular products, trendy fashion brands, sportswear and equipment, ACG products and collectible toys are expected to continue to gain popularity, driving active store expansions.
• A large supply wave continues to impact the market, likely resulting in increased pressure in Q4 2024, although the rent decline is expected to decelerate. The performance gap between various projects is still expected to widen.