SUZHOU Suzhou Asian City Report Suzhou Asian City Report
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– 2019 Asian City Report 25th Floor, Two ICC MARKET No. 288 South Shaanxi Road IN Shanghai MINUTES China Savills Research SUZHOU Suzhou Asian City Report Suzhou Asian City Report Free trade zones and Yangtze River Delta integration Popular F&B brands expand aggressively, while the policies help spur demand growth of mass-market fashion brands slowed SUPPLY AND DEMAND SUPPLY AND DEMAND GRAPH 1: Suzhou Grade A Office Market New Supply, Net Take-up Suzhou’s retail sales grew by 6.1% YoY in the first eleven months of 2019 GRAPH 3: Shopping Mall Supply and Vacancy Rate, 2014 to 2019 and Vacancy Rate, 2014 to 2019 Five Grade A office projects—Suzhou Centre Tower B located in West Supply (LHS) Take-up (LHS) Vacancy (RHS) SIP, Pacific Finance Building, Suzhou News Building and GCL Plaza in to RMB55.5 billion. The growth was 1.4 ppts lower than the same period in 2018. Nine new projects launched onto the market in 2019, contributing 600,000 36% East SIP, and Core of the World Tower C in the Moon Bay area—with a total GFA of 296,100 sq m were completed during 2019, pushing a total retail GFA of 771,000 sq m. Projects included Orstar City in Gusu 1,200,000 12% Suzhou’s Grade A office stock to 2.1 million sq m. district, Magic Holiday Plaza in Xiangcheng district, GCL Plaza and Zhaojia Lane Neighbourhood Centre in East SIP, iD Park in Wuzhong 500,000 30% Leasing activity was muted in Suzhou in the first half of 2019 in 1,000,000 10% response to the slowing economy and the ongoing financial de-risking district, and four projects located in Wujiang district—Xinhu Plaza, The campaign that started in 2017. New financial enterprises such as P2P MixC One Wujiang, Aegean Place Wujiang and Garden Li. The city’s stock 400,000 24% and microlenders were prohibited from entering the market, while the reached 6.5 million sq m, with shopping malls accounting for more than 800,000 8% majority of demand continued to come from tech firms. Third-party 80% of the total, a transformation from the original Singapore model of neighbourhood centres into larger-scale shopping malls which are more office operators such as co-working, makerspaces and incubators are still 600,000 6% 300,000 18% growing in 2019 after aggressive expansion in 2018. Two notable deals common now in cities like Shanghai. sq m sq m were WeWork’s lease of about 8,600 sq m in Suzhou Centre Tower B and Suzhou Centre and Longfor Shishan Paradise Walk, two landmark domestic brand Chuanlan’s ( ) lease of 15,000 sq m in Hong Leong projects, attracted many new brands to enter the Suzhou market for the 400,000 4% 200,000 12% City Centre. 川岚 first time, stimulating both footfall and consumption through these new brands and creative shopping experiences. The most aggressive brands The first sizeable office deal in almost seven years was concluded in 200,000 2% March when China Overseas acquired Suzhou International Fortune were F&B outlets and specifically milk tea brands, such as Hey Tea, Lelecha 100,000 6% Plaza in West SIP for RMB1.9 billion, with a GFA of roughly 130,000 sq ( ) and Nayuki. At the same time, domestic chain restaurants such 乐乐茶 m, equating to RMB15,000 per sq m. The project has since been renamed as Guimanlong ( ), Tanyaxue Hot Pot ( ) and Banu Hot Pot 0 0% 桂满陇 谭鸭血 2014 2015 2016 2017 2018 2019 China Overseas Fortune Centre. ( ) also entered major shopping malls. 0 0% 巴奴毛肚火锅 2014 2015 2016 2017 2018 2019 Luxury brands continued to focus on traditional department stores Additionally, the establishment of the China (Jiangsu) Pilot Free Source Savills Research Trade Zone (JSFTZ) in August helped increase interest in the SIP in such as Suzhou Tower, Matro and Jiuguang Department Store, though 2H/2019, attracting both domestic and foreign enterprises. The JSFTZ as the sector recovers some brands are considering opening additional Source Savills Research consists of three areas totalling 120 sq km: Suzhou (60 sq km, including stores in high-end shopping malls. Fast fashion and mass-market brands the 5.3-sq km Suzhou comprehensive bonded zone in SIP), Nanjing (40 have found the market more challenging, and there have been a number sq km) and Lianyungang (20 sq km). The Suzhou component will look of international brands that have relinquished spaces while other brands GRAPH 4: Shopping Mall Rental Index By Selected Areas, to establish itself as a world-class, high-tech industrial park with a focus are adjusting their store networks. Shopping centres that continue to rely Q1/2015 to Q4/2019 on driving innovation with an international dimension, developing on these brands to anchor their space and drive footfall will have to adjust City-wide West SIP East SIP Guanqian SND Wuzhong high-end industries, implementing modern management systems and strategies to better appeal to rapidly changing consumer tastes. GRAPH 2: Grade A Office Rental Index By Selected Areas, Q1/2015 120 to Q4/2019 opening up the economy on all fronts. RENTS AND VACANCY RATES 115 RENTS AND VACANCY RATES Citywide vacancy rates increased by 1.4 ppts YoY to 9.7%in Q4/2019. As new landmark projects launched onto the market, they may not have a City-wide West SIP East SIP Downtown SND Moon Bay The JSFTZ and YRD integration policies led to the gradual recovery of market demand with net absorption for the year totalling 159,500 sq m. direct impact on the market vacancy rate as pre-commitment rates will 110 145 Nevertheless, demand was not enough to absorb all the new supply and, tend to be relatively high. However, these projects do attract a lot of the consequently, the citywide Grade A office vacancy rate increased by 2.6 attention and footfall from the surrounding area and, eventually, tenants, 105 135 ppts year-on-year (YoY) to 30.4% by the end of 2019. resulting in the rise of vacancy rates in existing developments. Suzhou Grade A office rents fell 1.7% YoY to an average of RMB101.0 per sq Centre’s launch onto the market has had a significant impact on projects Q2/2013=100 100 125 m per month. While the overall market conditions weighed upon all in West SIP and even the wider area. Impacted projects are taking this landlords, those that have been more heavily exposed to fintech firms opportunity to adjust tenant mixes and positioning to fill space and better 95 115 and saw space being vacated by tenants, were more aggressive in their compete in the changing retail market. discounts to attract new tenants to take up vacant space. First-floor rents fell just 0.4% YoY to an average of RMB327.0 per sq m 90 Q1 Q1 Q1 Q1 Q1 Q2 Q2 Q2 Q2 Q2 Q1/2012=100 per month, influenced by the increasing vacant rates. Shopping malls in Q3 Q3 Q3 Q3 Q3 105 Q4 Q4 Q4 Q4 Q4 OFFICE MARKET OUTLOOK Suzhou New District were less impacted by new supply or rising vacancy 2015 2016 2017 2018 2019 Four Grade A office projects totalling 330,000 sq m of space will be rates and recorded an increase of 1.8% YoY. 95 delivered to the market in 2020, roughly on a par with 2019. 2020 supply Source Savills Research includes delayed projects that were originally scheduled for 2019, such as RETAIL MARKET OUTLOOK 85 Wharf’s International Financial Centre. New supply has focused on non-prime areas, especially Wuzhong Q1 Q1 Q1 Q1 Q1 Q2 Q2 Q2 Q2 Q2 Q3 Q3 Q3 Q3 Q3 Q4 Q4 Q4 Q4 Q4 New high-quality projects will continue to intensify competition, and Wujiang, in recent years, but the retail atmosphere is still lacking. 2015 2016 2017 2018 2019 especially for older developments. While Suzhou has one of the highest Projects have found it difficult to attract quality brands and shoppers and vacancy rates out of the key YRD cites, it also has the most to gain from occupancy rates of some projects have even fallen after project openings. While these projects are likely to find 2020 still challenging, it is hoped Source Savills Research a closer relationship with Shanghai, where city centre rents are close to RESEARCH three times the value. As companies look to cost control and tap into new that a growing surrounding population and improving the business James Macdonald talent pools, Suzhou will certainly be one of the first cities on their list. environment will allow development to gradually increase occupancy rates. Senior Director, China 789,000 sq m worth of new projects are expected to open in 2020, +8621 6391 6688 including Longfor Xinghu Paradise Walk, Hong Tang Shopping Mall [email protected] and Joy Breeze. This represents another sizeable increase in stock and will continue to increase competition within Suzhou. Better-quality Savills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads developments with more adventurous tenant mixes and engaging spaces rather than follows, and now has over 600 offices and associates throughout the Americas, Europe, could improve the retail atmosphere and encourage consumers to part Asia Pacific, Africa and the Middle East. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any with more of their hard-earned cash.