The rise of suburban retail in ShanghaiSeptember 11, 2013 / By
The nine satellite cities* that lie within Shanghai’s municipal borders have undergone a transformation from sleepy outposts to economic dynamos in the last ten years. Cities such as Anting and Songjiang have built up vast industrial zones, bringing with them thousands of new jobs and a surge in consumption power. Rising wages have put money into the pockets of a huge number of factory workers and production managers who are ready to spend locally.
Furthermore, the expansion of the metro network has brought several of these satellite cities such as Songjiang and Jiading within commuting distance of downtown Shanghai, resulting in more white collar professional residents living in these areas. In recent years, most purchases of new homes in Shanghai were in the suburbs: In 2008, 60% of new home sales in Shanghai were beyond the outer ring road. By 2013 this figure had risen to 75%. Affordable home prices and improved accessibility by rail and highway have made these locations attractive and liveable for first-time buyers. Developers have responded by building more shopping centres to meet the needs of local residents. According to our latest investigation, the suburban market reached 1.9 million sqm of total stock as of 2Q13 and the number will exceed 4 million sqm by 2016. This gives us a third category of retail in Shanghai, following “prime” and “decentralised” markets.
Until recently, organised retail in the satellite cities was limited to perhaps one or two mediocre state owned department stores. Anything else required a trip to downtown Shanghai. Soon enough, old low-end department stores and modest street-side retail in suburban districts could no longer meet the needs of younger and entertainment-seeking new residents. With the changing local economy in satellite cities, developers brought in more sophisticated retail offerings closer to where people live. These come in two flavours: large regional centres such as those built by Wanda and Powerlong, and smaller hypermarket-anchored community retail centres. Over the next few years, a supply boom of both formats is expected. Those new malls with more product choices are likely to change the shopping habits of local residents and raise the frequency of shopping trips.
Another category on the rise in suburban Shanghai is outlet malls. These are becoming a favourite among price sensitive consumers, and are gaining popularity with the rise of car ownership. Bailian Outlets Plaza in Qingpu was Shanghai’s first and most successful outlet, followed by Mega Mills. The next generation of outlet malls will include a stronger roster of international tenants, such as RDM-operated Florentina Village, similar to the one in Tianjin, and Premium Outlets.
* Nine satellite cities refer to Songjiang, Jiading, Qingpu, Jinshan, Fengxiang, Baoshan, Pudong, Putuo and Minhang.
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