It's a mixed bag for Shanghai's commercial spaces

A recent survey of Shanghai's retail property sector suggested the city's retail vacancy rate has reached as high as 34 percent, but data and analyses from various real estate research organizations told a different story.

For instance, China Real Estate Information Corp conducted its own survey and said more than 20 shopping malls across the city reported an average vacancy rate of 9 percent, which is still much higher than that in any other major Chinese city.

Among the malls, the Super Brand Mall located in Shanghai Pudong New Area's Lujiazui has a high vacancy of 34 percent, CRIC research indicated.

The truth, however, may be different from external appearances. According to a Shanghai Observer report, the Super Brand Mall launched a large-scale upgrade project in 2019, and during the three-year upgrade, the rest of the mall operated normally.

However, due to the COVID-19 outbreaks, the upgrade procedure got prolonged, said the report, citing sources in Charoen Pokphand Group (CP Group), the developer of the mall.

As of August, 75 percent of the mall's retail space was leased out, and the figure will likely reach 90 percent by the end of this year as 99 new brands will be available in the shopping center, the report stated.

Data on Shanghai retail properties' vacancy rate from commercial real estate services and investment firm CBRE suggested the sector is comparatively stable. Vacancy rate of Shanghai's retail space was 7.2 percent in the first half, while that a year ago was 6.9 percent, and 8.2 percent in the same period of 2020.

Owing to factors like location, project positioning and the mixture of businesses in a facility, the vacancy rate of different malls can be quite different, said Zhang Baoyu, research analyst of CBRE Eastern China.

For example, non-central shopping malls with a high proportion of food and beverage (F&B) retailers and service brands may see their vacancy rate rise, while shopping centers located in downtown areas usually recover at a faster pace as the city's business vitality regains at an accelerated pace, Zhang said.

Shaun Brodie, senior director and head of occupier research of China at Cushman & Wakefield (C&W), said the COVID-19 pandemic has accelerated a reshuffle in Shanghai's retail market.

"Midrange to high-end shopping center projects owned by large enterprises remain popular with retailers as they have offered concessions recently, like rent waivers to tenants. However, retailers leasing space in low-end shopping centers and street front shops have largely not been so fortunate, with a number of them vacating their leased space," said Brodie.

This has not gone unnoticed. The authorities concerned in the Shanghai government introduced a package of consumer stimulus measures to restore residents' consumer confidence and help the retail market to recover.

As a result, the customer traffic flow in Shanghai's midrange to high-end shopping centers picked up in September, especially in the suburban areas, Brodie said citing C&W data.

Indeed, Shanghai saw total retail sales recover over the third quarter as subway passenger traffic and shopping mall foot falls returned to normal, said experts at JLL, a global real estate advisor.

"Although leasing is recovering at a low pace, we still saw certain categories remain resilient and continue expanding," said Paige Chuang, head of retail agency for JLL Shanghai. "For example, luxury brands, skincare, perfume, new energy vehicle brands and community supermarkets did well."

The F&B sector recovered quickly following a sharp contraction amid the outbreak, contributing 45 percent of the third quarter's newly leased space, said Chuang, adding that premium F&B brands saw a particularly rapid rebound in leasing.

Amid the market recovery, a few prime retail projects including the Shanghai Suhewan Mixc World and JC Plaza were launched recently, boasting a number of debut stores and brands, according to C&W.

Located near the Suzhou Creek, the Shanghai Suhewan Mixc World is jointly developed by China Resources Land Ltd and Shun Tak Holdings Ltd. The mall has had more than 95 percent of its 60,000-square-meter retail space occupied by mid-October.

Among the 140-odd retail brands, 70 percent are "first" stores of various kinds — China debut, Shanghai debut, first store in Jing'an district, debut stores in the Suhewan region or the Jing'an district section of the Suzhou Creek area.

Along the city's bustling West Nanjing Road, JC Plaza is a mixed-use project renovated from a hotel that features many brands' debut stores. It is expected to extend the city's luxury retail landscape.

Overall, Shanghai's commercial real estate market has seen a relatively stable performance under the circumstances, industry experts agreed.