Shanghai’s retail property market witnessed buoyant performance in 2016 with ample supply and robust demand from both tenants and investors, a leading international property advisor said today.
Citywide, net absorption of retail space, a measure of change in total demand, surged to 581,000 square meters last year, more than twice the level of 2015, according to a latest report released by Colliers International.
“Shanghai’s retail property market was active last year, mainly boosted by increasing retail sales which grew by 7.8 per cent in the first 11 months,” said Carlby Xie, director of research for Colliers’ China operation. “Decentralization was a major theme in 2016 with six of the seven new projects opening in non-prime areas such as Qibao and Daning catchments.”
Despite ample supply, overall vacancy rate just climbed 0.3 percentage points from 2015 to 12.1 per cent by the end of last year, fuelled by robust demand for both new and existing properties. Fashion, particularly casual sportswear and fast fashion brands, food and beverage, as well as retailers that cater to children and their needs, were among the most popular tenants with landlords, according to Colliers.
On the rental side and exclude the effect of new supply where opening rents are typically below the market average, landlords managed to achieve an average rental increase of 4.2 per cent from 2015 with gains in both the prime and non-prime markets. With new supply included, however, average rent fell 4 per cent year on year citywide to 37.3 Yuan (£4.35) per square meter per day.
The city’s retail real estate investment market also registered very active performance in 2016 with nine en-bloc transactions, compared with one in 2015, Colliers data showed.
Looking forward, more than 1.5 million square meters of new retail property spanning 17 projects are scheduled to be delivered in 2017, among which more than 1.4 million square meters in non-prime areas.