Shenzhen’s best bet for retailers

November 25, 2016 / By  

When in Shenzhen, one will quickly notice that the more developed or ‘prime’ retailing areas are all located in the city’s three key CBDs: Caiwuwei, the city’s original CBD in Luohu District; Futian CBD, the current CBD in Futian District; and Houhai, a new emerging CBD in Nanshan District. The appeal of CBDs among retailers has been underpinned by the white collar workers housed in the myriad office towers clustered in these districts. For retailers, the presence of these high spending workers serves as a strong base to operate and grow their business. As a result, CBDs are usually the location of choice when making their first foray into the city.

However, with vacancy at very tight levels and rents among the highest in the city, is it still worth retailers to consider entering into these markets? We think yes. And here’s why.

  1. Scope for the working population to almost double by 2020. At present, Grade A office stock stands at 2.2 million sqm and 700,000 sqm, respectively, in Futian CBD and Houhai. However, total stock in these two CBDs is expected to roughly double between now and 2020 with about 1.5 million sqm currently under construction in Futian CBD and 1.0 million sqm in Houhai. Moreover, given the plans for the Futian CBD to develop as the city’s finance and administration centre and Houhai as a headquartering base, the type of new workers that will be moving into these CBDs will also likely come from a higher spending cohort.
  1. Stronger retailing cluster to emerge. Although the availability of retailing space within the city’s CBDs remains tight, new construction will see prime retailing floor space in Futian CBD and Houhai increase by about 400,000 sqm and 300,000 sqm, respectively, over the next two years. A large number of the existing shopping malls in Shenzhen were built by local developers, which have their own individual design and operational nuances. Looking forward, many of the new projects being developed will be from more reputable national and international developers with some located in landmark buildings such as PAFC mall. These new offerings will not only provide the market with much needed room for growth but will also likely attract retailers from other parts of the city to the CBDs.
  1. Further metro development. Futian CBD is currently served by five metro with an additional line under construction and another two planned over the longer term. For Houhai, it is served by two metro lines with another under construction and plans for potentially three more lines in the future. The construction of new metro lines not only makes the CBDs more attractive to office users but also open the districts up to more residents within the city; lending support to the retail market beyond normal working hours.

Looking ahead, these factors are likely to see Shenzhen’s CBDs continue to offer the best bet for retailers looking to grow their businesses in the city.

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