APPD Market Report Article


February 28, 2022


RMB 871


Retailers’ expansion plans continue to drive leasing demand

  • Leasing market sentiment remained active this quarter given Shenzhen’s solid fundamentals. Thanks to restored confidence, retailers were keen on expanding their footprints, which led to brisk leasing demand with quarterly net absorption reaching the highest record throughout the year.
  • Sector-wise, coffee and drinks and Chinese fast-food chains both gained momentum to expand citywide as they are sought-after by venture capital. In addition, more niche luxury labels entered the Shenzhen retail market. For example, Valextra and Maison Margiela opened their first South China stores in Shenzhen’s MixC projects.

Four new projects enter the market in 4Q21

  • Four new projects opened in the quarter, adding a GFA of 520,000 sqm in total to the Shenzhen retail market. Two of them achieved full occupancy upon grand opening while the occupancy rates of the other two projects both exceeded 90%, exerting minimal pressure on the overall vacancy.
  • Driven by the active leasing demand, many malls were able to fill up some vacant spaces and certain urban malls made progress on their large-scale refurbishment and adjustment of tenant mix. As a result, overall vacancy edged down by 0.1 ppts q-o-q to 2.5% despite the large influx of new supply.

Rents rise due to strong sentiment among most landlords

  • Most malls were able to hold the rents firm as the vacancy pressure continued to ease, and a few malls which are popular among young consumers were able to raise their rents, supporting overall rental growth. Thus, overall rent increased further by 1.4% q-o-q on a chain-linked basis, the highest quarterly growth rate during the whole year.
  • Although certain debt-crippled local developers sought to sell their assets, including several incomplete retail properties in both urban and suburban areas, potential buyers remained cautious due to the uncertainties over the future cash flow from these projects.

Outlook: Consumption upgrade to fuel the leasing demand further

  • Consumption upgrade will remain as the mainstay, bolstering the future growth of overall leasing demand. Trendy multi-brand boutiques are expected to expand aggressively due to their increasing popularity among the younger consumers, who are becoming the major consumer group with growing spending power and willingness.
  • Eight projects, nearly 700,000 sqm of space, are expected to enter the market in 2022, including several urban renewal projects. Since they are highly likely to achieve a satisfactory opening rate, overall vacancy rate is expected to stay generally stable. Overall rent is expected to grow steadily supported by robust demand.

Note: Shenzhen Retail refers to Shenzhen's prime shopping mall market.

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