Savills World Research Research

SPOTLIGHT China 20 – Retail cities 2016

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savills.com.cn/research 16% Annual supply growth Retailer expansion rate 2015-2017 10% China 20 retail cities

2015-2017 is going to be a challeng- ing time for the retail market in China. The stock of 20 of the country’s most important retail cities will grow on average by 16% per annum while retailers’ expansion 20 Cities Sectors Ranking rates will slow to below 10% and are

envisaged to slow further in the Summary —— 04 Sector performance —— 06 - 10 Suzhou - 17 coming years. Slower expansion —— 07 - 11 Nanjing - 17 Lifestyle emerging —— 07 - 12 Wuxi - 18 - 13 Hangzhou - 18 Dalian - 14 Ningbo - 19 Tianjin - 14 - 19 Shenyang - 15 Chongqing - 20 Qingdao - 15 Wuhan - 20 Xi’ an - 16 Changsha - 20 Zhengzhou - 16 Kunming - 20

2 3 Retail stock in 20 cities

A more challenging Unit: million sqm market Note: By end of 2014

China is experiencing a supply boom in its commercial and retail markets, a result of over exuberant investment in these asset classes over the last five years. The 20 cities covered in this report received roughly 9.5 million of retail supply in 2014 but this figure is expected to balloon to around 15 million sq m in 2015. Over the next three years, many more malls developed by leading property companies will emerge onto these markets with a much higher specification in design, scale and management. More supply and rapid improvement in offerings will place significant pressure on smaller developers and older projects but this also brings opportunities for investors to explore add-value renovation works for centrally located projects. Stronger, more diversified Shenyang developers are still likely to benefit from the growth in second tier 5.6 cities through acquisition and portfolio management. Beijing Dalian Not just faced with competition from bricks-and-mortar peers, the retail sector is also being challenged by online and overseas 9.5 2.2 market places. Tmall now has over 4,000 international brands on its platform, while some of them have not even opened a physical Tianjin store in China yet. New brands to China can utilise online channels 3.3 to test the market for a period of time before making a decision on their next step while online market places can also allow more established brands to be more selective and cautious in expansion Qingdao to new cities. 2.6 Brands are constantly reviewing their store networks, balancing Zhengzhou Xi’ an Nanjing their physical and online store presence while also attempting to 2.8 Wuxi keep store types more diversified and product lines more tailored 1.9 2.1 to each category of city. While the rapid expansion of physical 2.7 stores is no longer the key priority for retailers, there is still great interest from retailers for the 20 cities covered in this report. Suzhou Shanghai 2.6 8.9 While the real estate tends to move very slowly, it has to adjust to Chengdu the rapid pace that the retail market is evolving in China. Landlords 5.3 Wuhan Hangzhou are actively adjusting tenant mixes, spending money on renovating 1.8 older facilities, reconfiguring unit layouts as well as trying to 3.6 become more creative with promotions and advertising Chongqing campaigns. At the same time retailers are bringing innovative, Changsha Ningbo lifestyle elements to their stores to attract consumers. 3.8 1.9 1.7

million sqm million sqm over Kunming 9.5 15 4,000 2.5 Supply in 2014 Supply Overseas brands in 2015 in Tmall Guangzhou 3.9

Shenzhen 2.3

4 5 i Sector performance $ Although and supermarkets are slowing down expansion, sectors such as kids and F&B are better positioned.

Slower expansion Lifestyle emerging As key markets grow saturated and Lifestyle retail is increasingly a catchall Considered a niche market in China, % retail sales growth rates slow, phrase for lifestyle brands, lifestyle the development of lifestyle stores is 50 international brands, especially those retailers and lifestyle stores. Lifestyle still in its infancy. Many lifestyle stores already with a sizeable presence in retail can be small independents or are small-sized, managed by individu- China, are taking their time in making international chains, and come from als, located in inconspicuous street decisions with regards to new store any positioning or retail category. The corners with low footfall and cosy openings. Other brands are now thread that ties lifestyle retail together environments. However, as the retail focusing more on opening in less is the emphasis on the consumer rather market (especially physical stores) competitive cities and partnering up than the product. slows down and shopping malls seek with reputable and well respected greater differentiation, more investors developers. Lifestyle retail identifies a specific and and landlords are eyeing this retail sometimes narrow catchment group category, hoping to offer more unique The average expansion rate (newly and creates a store format, layout, shopping experiences to customers. opened stores as a percentage of location and design which best suits existing store count) of the retailers this grouping. The store is then stocked For international retailers, lifestyle is surveyed in the key 20 cities has with the correct products, irrespective currently coming off through more slowed to 10.2% in the twelve month of the product category. The stores distinctive store design, more detailed period leading up to Q2/2015. This also provide services to enhance and targeted group, bigger scale with more means that if a retailer already had a augment the whole experience. A comprehensive products and in-store total of 20 stores in the 20 cities lifestyle retailer can be a multi-brand cuisine service. surveyed it has only opened up an or individual brand as long as they additional two stores in total in those have a broad enough product or twenty cities over one year period. service offering to provide the venues are The sector is the retail has been Entertainment luxury Kids-related consumer with the desired experi- important for shopping malls to hardest hit sector as a result of one of the fastest growing Jewellery and luxury sectors continue ence. The most important thing is that keep shoppers in the retail the anti-corruption campaign categories in recent years to record single digit growth and lag there is a strong sense of personality center for longer and make it feel and the economic slowdown as across all categories as parents behind other retail sectors, though they with a clearly-defined target customer more like a center of the well as overseas buying and take their kids to shopping did record a slight pick-up in expansion group. community. KTVs and cinemas online shopping. Some brands malls in their spare time. Toys rate compared to the previous 12 have long been the most have started to adjust their R Us now operates close to 50 month period. Overseas buying and the common anchor tenants for prices in China and received stores in over 20 cities while anti-corruption campaign continue to malls. In recent years new KTV positive feedback from clients. Gymboree operates over 200 be major obstacle for both sectors, venues are upgrading their There has been a slight “Play & Music” centers. Luxury however recent price adjustment by premises while new cinemas recovery in leasing demand in brands such as Dior and some of the brands and tentative steps Figure 1: Expansion rates of selected sectors tend to have IMAX. These better some of the better second tier Armani have also launched by the government to reduce import facilities will means old stores cities where brands are able to their own children's clothing duties for certain goods have been Cafe Fast food Luxury Affordable luxury will face more challenges. achieve very fabvourable rates. lines in China. warmly welcomed by retailers and Mid-end fashion Jewellery Fast fashion shoppers alike. Brands have also 60% benefited from the increasing competi- tion for retailers in second tier cities 50% In the fashion sector The supermarket sector Seen as the most reliable which has given them the upper hand strategies vary greatly though has become increasingly sector, F&B is contributing in negotiations with landlords. 40% most brands understand the competitive forcing some more to landlords’ rental importance of having a strong underperfoming stores to revenues than ever before, While retailers are reining in their plans 30% online presence. Physical close, while new stores are still both as a result of more space for short term growth, there is still stores increasingly adopt opening. More forms of being allocated to F&B and tremendous potential in China for new 20% innovative design, incorporat- supermarket are emerging. becuase rents have continued entrants. Only 52% of the apparel ing mobile technology and Larger sized hypermarkets will to rise. The main challenge for brands listed in “Interbrand Best Retail 10% lifestyle elements to keep them continue to open in more the sector is increasing Brands 2014” have entered the China fresh and inetresting. Some suburban locations and lower overheads (wages & rents). market, of these, only 59% (30% of the 0% sports brands are leading the tier cities while city centers of Meanwhile, as the number of total) are considered to run an trend by launching more unique leading cities will likely see restaurants increases in most established network of stores. That -10% concept stores, and winning more boutique, specialized shopping venues, competition means there is still significant scope for Q2/11 Q2/12 Q2/13 Q2/14 Q2/15 customers’ loyalty through supermarkets. has also increased. 70% of retailers to enter or greatly 6 mobile Apps. expand their store network in China. Source: Savills China Research, Company websites 7 Top picks ECONOMIC RETAILER Retailers favour the cities of regional hubs. POTENTIAL PENETRATION What makes a successful retail city? There is no hard and fast Shanghai rule for how to make a vibrant retail market, though of course city population and wealth are important indicators and help to Bejiing explain why Shanghai and Beijing typically come top of the list. Once you go beyond the first tier cities however there are Shenang different considerations to identify a viable market place, and Chengdu what may work well for one brand may not work for another. Guangzhou While cities like Chengdu and Shenyang rank in the second half of the cities covered in terms of economy, placed 11 and Chongqing 16 respectively, they rate in the top half of the list by retailer presence, coming in at 3 and 7 respectively. In contrast, Wuhan Suzhou and Ningbo rank 6 and 13 in terms of economy but only 12 and 19 in terms of retailer presence. Tianjin Comparing to the densely concentrated Yangtze River Delta Zhengzhou area where each city vies for population, business and retailers, Chengdu and Shenyang are both provincial capitals Wuxi and regional business hubs with few direct competitors with all the key economic indicators far exceeding other cities in the Suzhou surrounding area.

Qingdao Retailers also look at a city’ s soft power or its influence in the region more than just its economic prowess. This is one of the Kunming main reasons why some cities in the central and western Shenzhen regions of China recorded higher retailer penetration than equally developed cities on the east coast. However, as with Dalian any rule, there are always exceptions and in this case it is Changsha. The city’ s GDP growth rate in 2014 ranked third Nanjing amongst the 20 cities listed in this report, but Changsha is close to the bottom of the city ranking in terms of retailer Xi’an presence. While many retailers believe that the city holds potential, limited quality retail stock makes it difficult to find a Changsha suitable store location.

Hangzhou Wuhan is the city that moved up the ranking of both market potential and retail presence. In western and central China, Ningbo Wuhan replaced Chengdu in 2014 as the second largest economy in the region, only after Chongqing. It also recorded the highest expansion rate among the 20 cities especially in Note: “Potential” focuses on macro economic figures (such as GDP and retail sales) and “penetration” focuses on the size of retailer stores networks the luxury sector. (such as fashion, fast food and cinemas)

Shanghai tops the two charts for consecutive two years

Wuhan is our top pick city

8 9 As the capital city of China, Beijing has always Rimowa. witnessed the been viewed as a priority for retailers to tap into opening of Carven, Diesel and Sandro. the Chinese market. The city is where many luxury brands established their earliest presence In Wangfujing, The Malls at Oriental Plaza and during the early 1990s. Beijing’ s services sector In88 also received strong demand from mid to accounts for more than three quarters of GDP high-end brands. In 2014, Moschino, Mikimoto and is the highest in the country. and Georg Jensen opened in The Malls at Oriental Plaza while In88 introduced luxury Beijing Beijing has a very scattered retail distribution brands such as , Paul Smith and Tod’ s pattern. Traditional precincts include Wangfujing, after its repositioning. Xidan and Qianmen, catering to tourists and local residents, and are mainly composed of estab- Xidan Joy City is well known as a top shopping lished department stores with a long history. For destination for young and trendy consumers. In international retailers CBD, Lufthansa, Sanlitun 2014, the project introduced Innisfree, Stay Real and Financial Street are also attractive as these and UGG. areas target white-collar workers and expatriates. H&M added eight new stores in Beijing in 2014, The eastern area, including Wangfujing, CBD, expanding from the city centre to more decentral- Lufthansa and Sanlitun, are now the top retail ised areas such as Tongzhou and Daxing. destinations in the city with most malls positioned at the mid to high end of the market. Projects in CBD area were the most active in 2014, attracting Shanghai tops the retail list of 20 cities. As The modern-meets-traditional Huaihai Road new retailers through repositioning. SKP Beijing, China’ s leading financial and shipping (M) unveiled Hermes’ fifth Hermes Home in one of China’ s top sales revenue projects Expansion centre, the influx of expatriates and flourishing the world in 2014. introduced Hermes, Miu Miu and Brioni, while business environment ever since the 1850s 2 2 CCP Shopping Street introduced several flagship H&M has made the city attractive to both domestic The financial hub of the city, Lujiazui, has stores such as Michael Kors, Max Mara and and overseas investment. The city is also one maintained low vacancy rates during the past Potential Penetration of China’ s most densely populated cities, few years as a result of limited new supply. ranking ranking comparable to Tokyo and far exceeding the Forever 21 and Disney opened their stores in likes of and . early 2015, and Eslite Bookstore plans to Shanghai open in 2016. New entry Primary retail areas of the city include Nanjing Road (W), Nanjing Road (E), Huaihai Road Shanghai is the largest market especially for a 9.5 8.6% (M), Xujiahui and Lujiazui. All are normally at number of Japanese brands such as Uniqlo, Vera Wang Cheap Monday the top of the list of locations for new Muji and Moussy. These three retailers have Capital city and international brands to the Shanghai market. opened a total of around 90 stores in Retail stock Retail sales (Million sq m) growth Shanghai to date. political center of China Nanjing Road (E) Pedestrian Street is known as a mecca for tourists, both domestic and Brands also favour the larger scale shopping international. In 2014, M&M’ s opened malls in emerging locations. American Eagle M&M’ s World in Brilliance Shimao Interna- Outfitters and New Look have expanded into tional Plaza with a leasable area of 1,800 sq landmark malls in suburban locations, such as m. Songjiang Wanda Plaza.

Nanjing Road (W) has witnessed the development of China’ s luxury market since the first round of retailers entered the area in the early 2000s. The area saw the entry of even more designer brands in 2014, such as NO.1 Paul Smith, Tory Burch and Maria Luisa. Highest ranking in retailer presence

9.1%1 1 11

Potential Penetration Expansion New Entry ranking ranking

Michael Kors Abercrombie Fitch Moussy Old Navy 8.98.8 8.7%8.7%

Retail stock Retail sales 10 (Million sq m) growth 11 Shenzhen is well known for its vitality and Luohu districts. In Futian CBD, and its younger population with an Terminal One introduced Maria Luisa, average resident age of 30. Consum- Gant and Versus. ers are consequently more than willing to try new, trendy products and Due to its proximity and ease of services. access to , many Shen- zhen residents are used to buying Shenzhen’ s main retail areas are products in Hong Kong as prices there scattered from west to east. Two of are much cheaper. This meant that Shenzhen the most established areas, Huaqiang the luxury market in Shenzhen is Bei and Dongmen in the old the part relatively subdued and store numbers of the city are dominated by street per luxury retailer are much lower than stores, specialty markets and even in some second tier cities. department stores, while other retail However, mid-end retailers continue areas such as Futian CBD and to enjoy stable growth particularly in Nanshan in the newer part of town emerging areas where larger have focused on becoming new retail residential communities are located. cores with a number of modern style quality projects. Shenzhen has seen more retail supply in emerging residential areas such as In 2014, most new stores by interna- Longgang since 2013. The successful Guangzhou tional brands were focused in Futian opening of Longgang Vanke Plaza in Longgang district, which introduced four brands under Inditex and two brands under H&M, has been well received by surrounding residents. In 2014, two new projects by renowned developers opened in the decentral- Guangzhou is the third largest market bellwether of Guangzhou’ s retail adjustment, introducing several new ized Longhua New Area in Bao’ an in terms of retail sales, and holds the market and has consistently recorded brands to the Guangzhou market district. Muji and Uniqlo opened their highest five year retail sales CAGR the highest rents in the city for a including Roger Vivier, Sandro, Bape first stores in Longhua New Area in 9 among first tier cities at 16.6%. The number of years. Huanshidong and and Stay Real. The area is also Square, while Gap and Old Navy city is home to one of China’ s earliest Beijing Road in Yuexiu district are welcoming a number of emerging opened in Galaxy Coco City. shopping malls, Tee Mall, which still dominated by local developers and local lifestyle brands and buyer shops boasts one of the highest rental rates department stores. such as OCE and 01 Men. in the country. As the retail stock around Tianhe Zhujiang New Town, Guangzhou’ s The city’ s core retail area is one of Road accounts for roughly 70% of the new CBD, has been gradually the most concentrated among leading city’ s total prime stock, the area is improving its retail atmosphere over cities. While the retail market is almost certainly the first choice for the the past several years. In 2014, expanding to emerging locations and majority of international brands Mothercare and UR opened new sub cities, retail stock in prime areas, wanting to tap into the market. In stores in GT Land Plaza. More including Tianhe Road, Huanshidong 2014, Uniqlo opened a 6,000 sq m retailers are expected to set up shop Dynamic city with and Beijing Road, still accounts for store in Victoria Plaza which is with the opening of New World around 30% of the city’ s total stock. Uniqlo’ s only global flagship store in Development’ s . Additionally, the youngest population southern China. Taikoo Hui, a expected increase in occupancy rates Tianhe Road is undoubtedly the landmark project, is currently of surrounding office buildings should undergoing a round of tenant mix generate higher footfall and more expenditure. 4 4

Potential Penetration ranking ranking

Expansion 8.7% 3 5 UR 2.3 9.3% Potential Penetration ranking ranking Retail stock Retail sales (Million sq m) growth Highest retail sales growth

among 1st tier cities 3.9 12.5% New entry Expansion New entry

Roger Vivier Maria Luisa Stay Real Muji Santoni Retail stock Retail sales GapMaria Luisa (Million sq m) growth Santoni

12 13 As an export-oriented Renmin Road, located in Dalian. Projects tend to focus on As the transportation hub of area is also where H&M, Zara and in northeast China, Dalian is also Dalian’ s traditional CBD, is mid-end family shopping with northeast China, Shenyang is a Muji opened their first stores in the Third largest retail the largest city in terms of GDP in well-known as an established Dalian Roosevelt Plaza introduc- key focus for business and city. In 2014, H&M Home debuted stock in China the region. The city’ s main retail business area where many ing the first Toys R Us to the city consumption in the region. The in Joy City, while New Look areas include Qingniwa, Renmin companies have set up head- in 2014. city has the third largest retail opened in Palace 66. Road and Xi’ an Road. quarters and regional offices. stock in the country with 5.5 Times Square is one of the A number of leading developers million sq m of retail space by the The Golden Corridor is an 18 sq The primary retail area, Qing- earliest high-end shopping malls opened high quality new projects end of 2014. Core retail areas km strip running north-south Dalian niwa, is the traditional heart of the in the city. In 2014, the project in 2015 including Kardan Land include Taiyuanjie, Zhongjie and through the city centre, bringing a city, having witnessed the introduced the first Moncler and from Europe (Europark), Pavilion the Golden Corridor. certain amount of energy to the Shenyang emergence of the city’ s first MCM store in the city. from Malaysia (Pavilion Dalian) more fringe areas of the city, such department store (Mackay Mall) and Hang Lung from Hong Kong Dominated by department stores, as North Station and Municipal and the first large shopping mall Xi’ an Road has a history of (Olympia 66), bringing new such as The Centre, New World Government Square. The (New Mart Shopping Plaza). The around 100 years and now is a excitement to the city. Department Store, Isetan clustering of high-end residential area is now home to many key commerical area in west Department Store and New Mart, communities combined with office department stores of various Taiyuanjie accounts for 60% of developments along the Golden sizes, large shopping malls as total stock. In 2014, YSL opened Corridor, has also generated a well as street stores with most its first store in Shenyang in The strong base of demand to support retail centres owned by Dashang Centre. these new retail facilities. In 2014, Group, a local developer. Armani Collezioni expanded in Zhongjie enjoys a diversified and Shenyang Charter Shopping trendy tenant mix with several Center, while Stuart Weitzman Highest GDP in prime shopping centres, such as entered MixC. Korean high-end Joy City and Palace 66, run by cosmetics brand Sulwhasoo also northeast China experienced retail operators. The opened in Lotte , its first store in Shenyang.

New entry Moncler New entry YSL, New Look Expansion Hugo Boss Expansion Stuart Weitzman, Kate Spade, Daks Potential ranking 17 Potential ranking 16 Penetration ranking 16 Penetration ranking 8 Retail stock 2.2 million sq m Retail stock 5.6 million sq m

Tianjin is the fifth largest The area surrounding Heping, Kors, Longchamp and Cos. Qingdao is well known for its coastal economy in China and one of Binjiang and Nanjing roads, resorts and is a tourism destination in China’ s four municipalities. The known as Tianjin’ s traditional Laochengxiang is an area with a northeast China. The city is also the development of Binhai New Area prime retail area saw the opening long history and mainly targets economic centre of Shandong over the last decade has brought of Quanye Bazaar, one of tourists and individuals looking for province, boasting a number of new growth drivers to the city’ s China’ s earliest department some cultural experiences. Key China’ s leading brands such as Haier economy and also added stores back in the 1920s. The retail projects include New World and Tsingtao Beer. Hong Kong Road 800,000 sq m of new retail space area also accounts for one third Department Store, Lotte Depart- (M) is the iconic retail stretch of the Economic center of to this emerging area. of the city’ s retail stock ment Store and Joy City, one of Tianjin city while other areas, such as Shandong province (excluding Binhai New Area) and the most popular shopping malls Taidong and Licun, focus more on the In terms of core locations, many a large number of four/five-star in Tianjin. Apple opened its first surrounding residents. retailers still prefer the retail . In 2014, Hang Lung store in Tianjin in Joy City in areas around the city centre such opened its first shopping mall in 2015. As the most mature retail area of the Heping-Binjiang-Nanjing Road, Tianjin (Riverside 66), bringing a city, Hong Kong Road (M) has a The area also welcomed the opening Laochengxiang, Xiaobailou and number of new retailers to the Xiaobailou and Youyi Road used cluster of upscale retail projects, of The MixC, a 300,000 sq m Youyi Road. Tianjin market, including Michael to be more focused on the office Grade A offices, five-star hotels and shopping mall in 2015. The project market; however the retail high-end residences. Led by Hisense introduced a large number of new offerings have gradually improved Plaza and Marina City, the area brands to Qingdao such as i.t, over the past five years. Recent targets middle-income consumers and Abercrombie & Fitch and the first high-profile projects include is typically the first destination for a Sega Joypolis in northern China. Hisense Plaza in Xiaobailou and wide range of international brands. Galaxy Mall in Youyi Road. In Hisense Plaza welcomed the opening Taidong and Licun are two of the most 2014, Louis Vuitton and Gucci of Roger Vivier in 2014 and Long- popular retail areas for the mass opened in Galaxy Mall, while champ in early 2015. market. Wanda Group operates Vacheron Constantin opened its projects in both areas both having first store in Hisense Plaza. One of the four recorded satisfactory business since their opening. Licun’ s Harmony Mall municipalities also witnessed the opening of the city’ s first Tom’ s World in early 2015.

New entry Philipp Plein, Mikimoto New entry Roger Vivier Expansion Michael Kors, Longchamp Expansion Clarks Potential ranking 5 Potential ranking 12 Penetration ranking 7 Qingdao Penetration ranking 15 14 Retail stock 3.3 million sq m Retail stock 2.6 million sq m 15 Suzhou is the second largest city by department stores and retail Major retail developments in SND in the Yangtze River Delta in street stores. In 2014, Tory Burch are located along Shishan Road, terms of GDP and total population. opened its first store in Suzhou to the east of the well-known Old Town, Suzhou Industrial Park Tower in Nanmen. Suzhou Amusement Land. Lauder (SIP) and Suzhou New District Pal entered Matro SND in the first Xi’an (SND) are the three main districts SIP has recorded the fastest half of 2014. driving Suzhou’ s commercial development in the city starting development. with Singaporean style community Large scale projects in emerging centres in the early years and areas are also attractive to As a must-see tourist destination, more recently with large-scale retailers. In 2014, Wuzhong area Suzhou Old Town enjoys higher footfall multi-functional shopping malls saw a number of new international and a greater maturity compared and modern retail streets. Both entrants such as Old Navy and with SIP and SND. New Look and Fossil opened new Flaxus Tokyo in Aeon Mall. Key hub city in stores in SIP in 2014. Eslite Consisting of Guanqian, Shilu and Bookstore from opened in northwest China Nanmen, Old Town is dominated 2015.

As the capital city of Shaanxi most upmarket shopping mall, intro- MCM, Corneliani and Kenzo opened province, Xi’ an is the economic, duced a number of new brands in 2014 their first outlets in Nanmen Wangfu- cultural and transportation hub of including Shiatzy Chen and Agnès b. jing Department Store, in the same northwest China, as well as one of the malls Prada also opened its second most famous tourist destinations, Favoured by local residents and tourists store in Xi’ an. enjoying a rich history of more than alike, the Bell Tower area has also 3,000 years. The city has witnessed a diversified its tenant mix over the last Qujiang, which targets domestic Second largest GDP in booming retail market in recent years two years by introducing more fast tourists, unveiled Zara Home in with a number of new retailers eager fashion brands. In 2014, H&M opened a Qujiang Intime Department Store in Yangtze River Delta to enter the city. 2,6000 sq m flagship store Ginwa ME 8, 2014. introducing H&M Home. Core retail areas can be divided into With improved infrastructure and New entry Tory Burch, Old Navy Bell Tower, Nanmen and Qujiang. New entry Givenchy, MCM accessibility, the Nanmen area has Expansion New Look, Fossil Expansion H&M, UGG Potential ranking 6 Bell Tower is the most mature retail raised its profile and is becoming a new Potential ranking 19 area in northwest China and is home location for luxury retailers. Omega, Penetration ranking 12 Penetration ranking 13 Retail stock 2.6 million sq m to several international luxury brands. Givenchy and Sergio Rossi debuted in Retail stock 1.9 million sq m Zhongda International Mall, the city’ s Century Ginwa Mall, while Miu Miu,

Zhengzhou is the capital city of Henan diversified retailer mix. The opening of two Nanjing, the capital of Jiangsu first store in Nanjing in Amicizia. Hexi New Town is an emerging province, the most populace province in upscale projects in 2014 has helped province, has a rich political and area with the vision of becoming China with over 100 million citizens. upgrade this area and marked the debut cultural history. Primary retail Hunan Road is a favourite of local the new CBD of the city. The area Benefiting from China’ s high-speed of a number of international brands, areas include Xinjiekou, Hunan shoppers, though tourists are also has a number of modern retail railway network, Zhengzhou is evolving including Apple, Tod’ s and Moncler in Road, Confucius Temple while attracted by the famous scenic centres under development and from a provincial centre to a key transpor- MixC Mall while Michael Kors and MCM Hexi New Town is one of the key spots. Nanjing International planning. New residential tation hub especially as an intersection opened in Dennis David Plaza. In emerging areas. Centre, now known as Jinmao communities and public facilities connecting the northwest with eastern addition, high-end retailers are also Place, is under renovation with have also been built over the last Zhengzhou China. actively expanding in this area, with Xinjiekou has maintained its some leading brands expected to decade. At present, a majority of Nanjing Gucci, Cartier and Max Mara opening position as Nanjing’ s premium open new stores, such as retail projects focus heavily on Zhengzhou is a major destination for their second stores in Dennis David retail destination since 1930s, Swarovski, Trussardi and F&B and services. retailers expanding to inland China. Core Plaza. attracting local shoppers as well Peuterey. retail areas include Erqi, Bishagang and as those from neighbouring Huayuan Road. Bishagang is home to the municipal provinces. In 2014, Golden Eagle Confucius Temple is an historic government and Zhengzhou University, International saw the opening of area with a large variety of The leading retail area is Erqi, close to the favoured by local residents and college the first Pandora store and Teenie traditional F&B outlets and fast railway station, with a high footfall and a students. Zhongyuan Wanda Plaza has Weenie café. American Eagle fashion brands targeting young continued its tenant adjustment by adding Outfitters and QDA opened their and white-collar customers. more popular retailers, such as Innisfree Capital of the populated and New Look.

Henan Province Huayuan Road, a secondary retail area, is surrounded by financial institutions primarily targeting white-collar workers. Capital of Mid to high-end department stores have introduced new brands, such as Jiangsu province L’ Occitane (Guomao 360 Plaza) and Superga (Dennis Huayuan Road).

New entry Tod’ s, Innisfree New entry AEO， Furla Expansion Gucci Expansion Swarovski Potential ranking 18 Potential ranking 10 Penetration ranking 17 Penetration ranking 10 16 Retail stock 2.8 million sq m Retail stock 2.1 million sq m 17 Wuxi is the third largest city in Jiangsu Taihu Square is in the centre of Nanchang district, Key apparel province in terms of GDP and population. Wuxi’ s original commercial and industrial hub as Zhongshan Road is the main traditional retail well as a key convention and exhibition area. manufacturing base area while Taihu Square and Taihu New City Office workers and associated business activities are emerging retail destinations. support retail sales in the area.

Zhongshan Road is a traditional commercial Taihu New City is a key focus of the city’ s long and business hub of the city. The opening of term master plan and is also where the city’ s the first phase of Hang Lung’ s Centre 66 has municipal government plans to relocate to. A Wuxi helped to further consolidate the area’ s number of financial companies have already position as the city’ s leading retail district. established their headquarters in the area while New entry Etro Apple, Kate Spade and Versace made their some leading retail developers such as Wanda, Expansion Zara, New Balance Potential ranking 13 first appearance in Wuxi in Centre 66. China Resources and Lan Kwai Fong also have Penetration ranking 19 Zhongshan Road has also witnessed the plans to develop retail centres. Retail stock 1.7 million sq m opening of Tory Burch and Red Valentino in 2014. The city witnessed the opening of Inter IKEA Centre Group’ s first shopping mall in China in 2014, Wuxi LIVAT Shopping Centre, introducing a number of new fashion brands such as Old Navy Ningbo, a major centre for business, trade quickly evolved with the entrance of Louis and New Look. and logistics, is located on the south bank of Vuitton, Cartier and Hermes. New Balance Hangzhou Bay in the northeast of Zhejiang opened its flagship store in Tianyi Square in Province. It is a coastal city and the second 2014. largest city of Zhejiang Province in terms of GDP. Ningbo is also one of the largest Yinzhou retail area, to the south of the city, Third largest GDP in clothing manufacturing bases of China and targets the mass market especially local Jiangsu province the birthplace of a number of leading families, from the recently built high-rise domestic fashion groups such as GXG, Peace apartments in the surrounding area. At the Bird and Youngor. moment the retail precinct is centred on InCity Ningbo but a number of other commercial projects New entry Red Valentino Sanjiangkou, located in the centre of Ningbo, remain under construction in the immediate Expansion Mont Blanc is the leading retail area, well-known for its surrounding area. Potential ranking 14 very popular Tianyi Square wWith the opening Penetration ranking 14 of Heyi Avenue Shopping Centre and the Jiangdong and Jiangbei are comparatively Retail stock 2.7 million sq m second phase of International Shopping new retail areas with only one shopping mall Centre in 2009, the city’ s luxury market has currently located in each – Century Oriental Plaza and Jiangbei Wanda Plaza.

Hangzhou is one of China’ s wealthiest cities Lakeside, known for the West Lake views, Kunming is the fourth largest city in western chose to set up shop in Golden Eagle Mall. At with strong purchasing power and a dynamic attracting fashion-conscious customers and China after Chongqing, Chengdu and Xi’ an, the same time Monki and Charles & Keith tourism industry, making it a top choice for tourists and is home to a number of fast and plays an important role in connecting also opened their second stores in Kunming. retailers expanding into second tier cities. fashion brands and popular restaurants. The China with Southeast Asia. The city enjoys a area unveiled Forever 21 and Apple Store in long history as well as abundant natural The two main emerging areas in the north and Hangzhou’ s core retail areas include Wulin, the fourth phase of In77 in 2015. tourism resources. Kunming now ranks third south of the city saw rapid growth in retailer Lakeside and Qianjiang New City. among the western cities in terms of personal expansion with brands mainly positioned at Qianjiang New City, the city’ s newly planned Hangzhou disposable income. the mid end of the market. Tongde Kunming Wulin has the highest rents and the most CBD, is favoured by mid to high-end retailers. Plaza in the north saw the opening of the first luxury retailers of any retail area in Zhejiang The MixC has convinced some luxury brands The core retail cluster of the city which started Sephora store and the second GAP store. In to form in the 1980s, is comprised of Sanshi the south of the city Decathlon opened their Kunming province. Hangzhou Tower, one of the highest to open their second stores in Hangzhou, turnover projects in China, is highly favoured including Diesel, Loewe, Givenchy and Van Street, Qingnian Road and Baita Road. first store in Kunming in Nanyue City. by high-end retailers entering this affluent Cleef & Arpels. area. Stuart Weitzman and Michael Kors In Sanshi Street area, designer brand Vince debuted in Hangzhou Tower in 2014 Camuto and Dirk Bikkembergs opened their first stores in Kunming in Shuncheng Shopping Centre in 2014. Qingnian Road area has witnessed an active year for F&B outlets as Maan Coffee, Honeymoon Dessert and Burger King all

One of the wealthiest The hub linking inland cities in China China and Southeast Asia

New entry Forever 21, Michael Kors New entry Sephora Expansion Zara Expansion Uniqlo Potential ranking 8 Potential ranking 20 Penetration ranking 6 Penetration ranking 18 Retail stock 1.8 million sq m 18 Retail stock 2.5 million sq m 19 The Chengdu retail market has developed the city – Taikoo Li and IFS. The opening of New entry Prada, Hogan, Under Amour quickly over the past several years. The city is the two shopping malls has further consoli- Expansion Diane von Furstenberg one of the most diversified retail markets dated the area’ s leading status in the city Potential ranking 7 among second tier cities with an array of with a number of high-profile retailers opening Penetration ranking 11 Retail stock 3.8 million sq m developers expecting great things from the designer flagship stores. city. While maybe not comparable to some of the second tier cities on the east coast in Chanel, Christian Louboutin and Balenciaga Chengdu terms of its economic performance, Chengdu opened their first stores in western China in is regarded by many retailers as the centre of Chengdu IFS, while Louis Vuitton, Dior, Fendi commerce in western China with a much and Prada all opened duplex stores. In Tai Tremendous GDP stronger regional influence than its peers in Koo Li, Muji opened a 3,100 sq m flagship eastern China. store. Hermes, Gucci and Chloe all opened Projects in emerging areas are also wel- and retail growth duplex stores. comed by local consumers. Some areas such Prime retail areas of the city include Yan- as Panchenggang have not yet seen any shikou and Chunxi Road. Yanshikou focuses more on the mid-end and retail projects launched but offer such huge Known as the “City of Mountains” , In 2014, the newly opened WFC intro- high-end retailers to the area for the first mass markets with department stores potential that leading developers such as Sun Chongqing has seen tremendous growth duced Givenchy, Miu Miu and Dsquared2 time such as Moncler and Bottega Chunxi Road is the largest and most well- accounting for the majority of stock. Yanlord Hung Kai and Lotte have identified and over the past decade benefiting from while Prada also opened a 1,000 sq m Veneta. known retail area of Chengdu. In 2014, Swire Landmark saw the opening of Furla in 2014 already secured land plots for future develop- China’ s “Go West” campaign. The city’ s duplex store. Chongqing Times Square, and Wharf opened their first retail projects in and Shiatzy Chen in 2015. ments. GDP registered a real compound annual one of the earliest high-end malls in the Apple opened two stores in Chongqing in growth rate of 13.3% from 2001 to 2014, city, saw the opening of Bvlgari and 2014 respectively in Jiefangbei and while retail sales increased by a nominal Hogan. Guanyinqiao area. Their third store CAGR of 15.5% over the same period. opened in 2015 in The MixC. Leading retail market Guanyinqiao boasts one of the largest The city’s prime retail areas include malls of the city, Paradise Walk, and among second tier cities Jiefangbei and Guanyinqiao. high-end mall, Starlight 68 Plaza, which is home to Gucci, Cartier and Ralph Lauren. Jiefangbei is the earliest retail area in The area mainly targets local residents. Chongqing and is typically the first New brands entering Paradise Walk in New entry Chanel, Hollister destination for luxury brands opening their 2014 included Under Amour, Folli Follie Expansion Muji, Valentino first stores in the city, such as Louis and Dr. Martens. Chongqing Potential ranking 11 Vuitton, Gucci and Cartier. The area has a Penetration ranking 3 Retail stock 5.3 million sq m strong attraction for both tourists and In 2014, The MixC opened in Yangjiaping residents. area, bringing a number of mid to

enhancing its commercial influence and As one of the largest cities in central China, shopping mall in Wuhan, Louis Vuitton spurring on its retail market. Changsha in Wangfujing Department Wuhan is known for its status as a trade and upgraded its store into a flagship store in Store. GAP also established its first transportation centre and enjoys a dynamic 2014. Moussy, Fresh and Raoul opened their Most of the major retail districts are presence in Changsha in ID Mall. business environment with a large population. first stores in Wuhan at Wushang Plaza. located to the east of the Xiang River. The The main three districts - Hankou, Wuchang most notable traditional retail area is the The area surrounding the main railway and Hanyang - were originally separate cities. In Wuchang district, the main retail area used Changsha Wuyi Cluster, which lies along Wuyi station is also another high footfall They remain separated by the Yangtze River to be along Zhongnan Road, however this has Avenue. Its mature commercial atmo- neighbourhood, however, dated retail and the Han River, resulting in a city with gradually been overshadowed by the rapid Wuhan facilities and a less affluent catchment sphere has attracted a great many mid to several relatively independent business growth and modernisation of Jiedaokou and high-end brands, serving a wide range of means that it is difficult to reinvigorate the centres. Guanggu. The first Forever 21 store in Wuhan customers including those from Hunan area or raise its positioning leaving the was opened in May in Guanggu World City. province’ s lower-tier cities. area to be dominated by local department The oldest and the most famous retail areas As the capital city of Hunan province, stores. Changsha recorded the second largest are in the south-east of Hankou district, In Hanyang district, Zhongjiacun used to be In 2014, Friendship Shop, which is the retail sales figure among the cities in six namely Jiefang Road and Jianghan Road (the the main shopping area, but the southward main luxury store for the area after central China provinces after Wuhan. The former British Concession) both of which drift of urbanization has been shifting the renovation in 2008, introduced MCM, explosion in the creative and entertain- attract local consumers and tourists. In centre to southern Wangjiawan. Gucci and La Mer. The area also ment industries in recent years has Wuhan International Plaza, the biggest luxury welcomed Michael Kors and DKNY stimulated business growth in the city, JEANS opening their first stores in

One of the largest city Second highest retail sales in central China in central China

New entry Forever 21, Moussy New entry Michael Kors, MCM Expansion UR Expansion Gap Potential ranking 9 Potential ranking 15 Penetration ranking 9 Penetration ranking 20 20 Retail stock 3.6 million sq m Retail stock 1.9 million sq m 21 Our services

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James Macdonald Siu Wing Chu China Research China Retail +8621 6391 6688 +8621 6391 6688 [email protected] [email protected] This document is prepared by Savills for information only. Whilst reasonable care has been exercised in preparing this document, it is subject to change and these particulars do not constitute, nor constitute part of, an offer or contract; interested parties should not rely on the statements or representations of fact but must satisfy themselves by inspection or otherwise as to the accuracy. No person in the employment of the agent or the agent's principal has any authority to make any representations or warranties whatsoever in relation to these particulars and Savills cannot be held responsible for any liability whatsoever or for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. 22 23