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Savills Research

Retail Shenzhen – October 2021

Citywide vacancy rate decreasesLeasing demand from the F&B sector remained strong.

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“ High occupancy at the newly-launched project and abundant leasing transactions resulted in a surge in the quarterly net take-up of the Shenzhen retail property market during Q3/2021.” CARLBY XIE, SAVILLS RESEARCH

Dorian ZhiSenior DirectorSouthern China+86755 8436 7036doriandl.zhi@savills.com.cn

RETAIL

James MacdonaldSenior DirectorChina+8621 6391 6688james.macdonald@savills.com.cn

Carlby XieDirectorSouthern China+8620 3665 4874carlby.xie@savills.com.cn

RESEARCH

Please contact us for further information

Savills team

Ray Wu Managing DirectorShenzhen+86755 8436 7008ray.wu@savills.com.cn

CENTRAL MANAGEMENT

• Shenzhen’s retail sales grew by 17.4% year-on-year (YoY) to RMB615.0 billion by the end of August 2021.

• A new completion, Longgang Wanda Plaza, located in the Longgang submarket, entered the retail property market, bringing a total retail GFA of approximately 305,000 sq m to the market.

• With the new addition, the total retail stock in Shenzhen expanded 5.7% quarter-on-quarter (QoQ) to 5.6 million sq m.

• The citywide net take-up surged to approximately 324,000 sq m in Q3/2021.

• The F&B sector outshined other sectors as the number of store openings coming from F&B retailers accounted for nearly 40.0% of the total.

• The citywide average vacancy rate edged down by 0.8 of a percentage point (ppt) QoQ to 8.5%.

• The citywide average ground-floor rent edged down by 0.1% QoQ but moved up by 1.1% YoY on a rental index basis to RMB647.9 per sq m per month by the end of the quarter.

• Three shopping centres are expected to be launched during Q4/2021, bringing about a combined retail GFA of 402,660 sq m to the market, two of which will be located in the emerging areas.

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SUPPLY There was only one new project launched in the market during Q3/2021. Located in the Longgang retail submarket, Longgang Wanda Plaza debuted, bringing a total retail GFA of approximately 305,000 sq m to the market. Correspondingly, the total stock expanded by 5.7% QoQ to approximately 5.6 million sq m. The new injection helped improve the retail ambience of the neighbouring area and offered an alternative shopping experience to the local residents.

DEMANDOverall, demand for the Shenzhen retail market remained strong, evidenced by many store openings and upgrading activities during Q3/2021. In particular, the F&B sector outshined other sectors as the number of store openings of the sector accounted for nearly 40.0% of the total. This could also be reflected in some cases, even in prime retail catchments. For example, after the closure of Eslite Spectrum Shenzhen at MixC World last year, the landlord reconfigured the retail stores and opened part of the vacant areas as “Mixc Food Lab”, introducing several renowned F&B brands such as Fuwa Fuwa, Sushi Hanzo, Peet’s Coffee and others. Similarly, a food court was opened at the PAFC Mall in Futian, and Shake Shack opened its second store at Futian Coco Park after its first Southern China store at MixC World opened in May 2021.

Meanwhile, retailers from the fashion and accessories continued to show interest in setting up new stores in Shenzhen, as were the cases of Tom Ford Fashion, Yohji Yamamoto, Chums, On and other chic retail brands. Other subsectors of retailers expanded in the market as well. For instance, New Energy Vehicle (NEV) brands such as Tesla and NIO opened new stores at several shopping centres, and Time Vallee and Chaumet expanded in the market by taking up retail space at One Avenue and the MixC, respectively.

As a result of the high occupancy at the new project and some abundant leasing transactions on the market, the quarterly net take-up of the Shenzhen retail property market surged to approximately 324,000 sq m as of the end of the quarter. This figure was 3.4 times higher than that of 1H/2021. Correspondingly, the citywide average vacancy rate decreased by 0.8 of a ppt QoQ to 8.5% by the end of Q3/2021.

RENTSAcross the board, most shopping centres maintained their rental levels during the quarter. However, several in the prime areas, especially in the Futian catchment, slightly lowered their rents to address the needs of project upgrades and trade-mix adjustments. Owing to this, the citywide average ground-floor rent edged down by 0.1% QoQ on a rental index basis to RMB647.9 per sq m per month.

MARKET OUTLOOKShenzhen’s economic and demographic growths should remain positive, underpinning a strong outlook for the local retail property market and its development going forward. Although market penetration of luxury brands to Shenzhen continues to be lower than that in Beijing and Shanghai, upscale retailers have already demonstrated a growing appetite for enlarging their market shares in the Shenzhen retail market. In terms of supply and demand dynamics in Q4/2021, three new shopping centres with a total retail GFA of approximately 402,660 sq m are scheduled for entering the market in the next quarter, two of which are located in the emerging areas. The entry of these two new completions should help improve the retail ambience in these emerging areas. Nevertheless, the citywide average vacancy rate is expected to remain stable. However, the new completions are expected to weigh on the growth in the citywide average rent, pointing it south in Q4/2021.

Source Savills Research

GRAPH 1: Citywide New Supply, 2016 to Q3/2021

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GRAPH 2: Vacancy Rate By Submarket, Q4/2016 to Q3/2021

Source Savills Research

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Citywide Futian Luohu Nanshan Bao'an Longgang Longhua

GRAPH 3: Rental Index By Submarket, Q4/2016 to Q3/2021

Source Savills Research

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Note Calculation of rental indices for all submarkets starts from Q1/2004 except for: Luohu – Q4/2004; Nanshan – Q2/2006; Longgang – Q3/2012; Bao’an – Q3/2013; 5. Longhua – Q3/2014

Source Savills Research

BRAND SECTOR PROJECT SUBMARKET

Time Vallée Accessories One Avenue Futian

Chaumet Accessories The MixC Luohu

Shake Shack F&B Futian COCO Park Futian

TamJai Yunnan Mixian F&B Futian COCO Park Futian

Hometown and Mountains F&B Happy Harbor Baoan

CHUMS Fashion MixC World Nanshan

Yohji Yamamoto Fashion The MixC Luohu

Tom Ford Fashion Fashion The MixC Luohu

On-Running Sports& Outdoors The MixC/MixC World Luohu/Nanshan

TABLE 1: Selected New Stores, Q3/2021

Retail