Terracotta Warrior land of retail opportunity

May 20, 2016 / By

Little known to outsiders for the daily life that stirs beyond the confines which house the world-famous Terracotta Warriors – the thousands-strong army of soldiers dating back to the late third century BCE – Xi’an, China is often overlooked for its retail potential, outshone by high-profile Chinese cities like Beijing and Shanghai.

But when compared to smaller cities of a similar size and stature, unlike some Tier 1.5 and Tier 2 cities in China, Xi’an is not up against any serious risk of retail oversupply given its tight market conditions. With vacancy hovering at just 3.0%, Xi’an is further backed by stable, growing, and untapped demand – especially as retail quality-starved consumers grow hungrier.

Thus, what many people may not realise is that Xi’an presents some real opportunity for the experienced developer, so long as there is a commitment to building quality retail in the city.

After opening last month, City On Xi’an is the latest – but also only the third – quality mall in the market. The outlook for the new Taubman-developed shopping centre is promising, as is that for its main competitors, Gemdale Plaza and Sunshine Paradise, which continue to benefit from high footfall and sales.

Though vacancy in the tight market is expected to creep above 13.0% by 2019, the rise will be mostly driven by an influx of locally developed, non-quality projects. Moreover, only around 10.0% of the city’s future projects are expected to deliver quality retail to the market. This means that increasingly selective consumers will continue to flock to better properties as they become available.

And while previously strong sales contributions from nearby mining wealth-laden consumers have significantly declined due to the downturn in industry, several other factors will support future demand for quality retail in Xi’an.

Firstly, local consumers are expected to remain a stable source of demand, and their spending power will rise as their disposable incomes increase. Secondly, weekend shoppers from nearby areas continue to be a constant in the market, and this is unlikely to change as Xi’an entrenches its position as the closest destination for quality retail. Thirdly, as is the case in other parts of China, the F&B boom is taking off in Xi’an, with popular Chinese restaurants such as Green Tea and Uncle Tea Restaurant rapidly expanding in the market while Western-style restaurant chains like Blue Frog are planning to open multiple locations in the city. Finally, as one of the top tourist destinations in China, Xi’an has a strong and steady stream of consumers at its doorstep. Tourists visiting the city to see the Terracotta Warriors often bypass the city’s retail offerings. This huge potential demand source remains largely untapped, and addressing the consumer-needs and wants of these millions of travelers could do wonders to boost Xi’an retail performance in the future.


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