Shanghai retail property market continues to grow

Shanghai's retail property market continued to gain momentum over the past quarter despite abundant new supply, according to the newest research released by international real estate consultancy Savills.

Citywide, first-floor rent prices edged up 0.4 percent from the previous three-month period to 26.1 yuan (US$4.1) per square meter per day on average during the July-September period, extending gains for the third straight quarter, Savills said in its latest quarterly report. Year on year, it represented a growth of 0.7 percent.

"Despite the addition of many new projects, average vacancy rates at local shopping malls remained unchanged at 9.2 percent in the third quarter of 2021, or down 2.4 percentage points year over year," said Elle Xu, senior manager of research at Savills China. "Tenants from the service sector, among others, have been a key driving force of demand, accounting for 31 percent of newly leased areas in the third quarter, or 39 percent of space leased in newly completed projects."

The past quarter saw altogether six new projects introduced to the market, bringing some 560,000 square meters of new retail space to Shanghai, which by the end of September, had a total retail property stock of 14.4 million square meters within the Outer Ring Road, Savills data showed.

Major new projects rolled out over the last three months include CapitaLand's Raffles City The Bund, Shui On Land's The Hall of Sun, both in Hongkou District, and Taikoo Li Qiantan, a 50-50 project by Swire Properties, and Lujiazui Group, in the Pudong New Area, which altogether added more than 420,000 square meters in retail GFA (gross floor area).

A separate report released earlier by JLL found that overall net take-up at local shopping malls exceeded 524,000 square meters during the third quarter amid continuously recovering leasing activities as well as strong performance in newly opened malls.

"Luxury brands accelerated their expansion with a focus on flagship stores, new concept stores, and pop-up stores," said Paige Chuang, head of retail agency for JLL Shanghai. "More high-end skincare, perfume, and make-up brands made their debut in Shanghai while improved leasing was also driven by auto showrooms, experiential indoor sports, chain restaurants, and coffee and dessert shops."

Prime vacancy dipped 0.3 percentage points quarter on quarter to 9.7 percent while rates in decentralised locations fell 1 percentage point to 9.3 percent, JLL data showed.

For the last quarter of this year, around 551,000 square meters of new retail supply spanning seven projects, including Daning Jiuguang in Jing'an District and AI Plaza in Xuhui District, are scheduled to be released into the local market, according to Savills' forecast.