CHINA RETAIL PROPERTY MARKET WATCH 1H 2016 中国商铺市场观察 2016年上半年 RESEARCH 研究报告 MARKET HIGHLIGHTS Mid-range retail brands drive demand
Amid relatively modest GDP growth of Victoria’s Secret opened its first China 6.7% in China in the first half of 2016 flagship store in Shanghai, taking up (1H 2016), growth in retail sales value space formerly housing one of Louis decelerated slightly to 10.3% year Vuitton’s four retail outlets in the city, on year (Y-o-Y) to RMB15.6 trillion, while fast-fashion brand Bora Aksu compared with 10.7% in 2015 and also opened its first store in China in 12.0% in 2014. Meanwhile, annual China World Mall in Beijing. Meanwhile, growth in per-capita disposable income experimental retailers were active during and consumption expenditure for urban 1H 2016, with Legoland Discovery Center household also decelerated to 5.8% and opening in Shanghai’s Parkside Plaza 5.3%, respectively. and a Sega Joypolis store opening in Shanghai’s Global Harbor mall. To attract footfall, a number of landlords adjusted the tenant mix in their shopping The rapid development of online malls by allocating more space to food shopping continues to pose a challenge and beverage operators and leisure for traditional bricks-and-mortar retailers. retailers. As these retailers have lower Online retail sales in 1H 2016 rose 10.3% rental affordability, five out of the seven Y-o-Y to RMB2.68 trillion, accounting major Mainland cities covered in this for 17.2% of total retail sales in China. A report recorded rental declines during 1H number of major retailers launched online 2016. Lower rents stimulated demand, stores during the period. For instance, Mid-range resulting in stable vacancy rates in camera retailer Leica opened an online retailers have the cities, despite increased new retail store on Tmall.com, while British fashion supply. brand Three Floor entered the China become the major market by selling through Xiu.com, a local demand driver Mid-range retailers have become the fashion e-commerce website, instead of major demand driver as a result of the setting up a physical store. On the other due to slower government’s anti-corruption policies and hand, more online retailers have adopted economic growth. slower economic growth. Fast-fashion the Online-to-Offline (O2O) model. For retailers, in particular, were the most instance, China’s major online bookseller active in seeking prime retail space for Dangdang announced that it plans to expansion. For instance, lingerie brand open 1,000 physical bookstores across China in the next three years.
Looking forward, competition from TABLE 1 online retail, the ongoing anti-corruption China’s economic indicators campaign and Chinese buyers’ increasing overseas purchases will remain major Latest Year-on-year Period challenges in the retail market, especially reading growth for high-end retailers, while fast-fashion GDP (RMB trillion) 1H2016 34.1 +6.7% and other mid-range retailers are expected to continue entering or expanding in Population (billion) 2015 1.4 +0.5% China. Retail supply will be abundant +1 percentage Registered urban unemployment rate 1H2016 5.2% in the coming year, particularly in non- point core and emerging districts, such as the Real-estate investment (RMB trillion) 1H2016 4.7 +6.1% Changping and Tongzhou districts in Beijing and the Longhua and Longgang Retail sales value (RMB trillion) 1H2016 15.6 +10.3% districts in Shenzhen, which is expected Per-capita disposable income of urban to put downward pressure on retail rents. 1H2016 16,957 +5.8% households (RMB) As a number of theme parks will be built in China in the coming years, which will Per-capita consumption expenditure 1H2016 11,185 +5.3% of urban households (RMB) lend support to tourism and thus the retail market, the long-term outlook for China’s Source: National Bureau of Statistics of China / Knight Frank Research retail market remains cautiously optimistic.
2 Holdways.com 1H 2016 CHINA RETAIL PROPERTY MARKET WATCH RESEARCH
CHART 1 KEY FINDINGS China retail sales value and per-capita consumption expenditure of urban households
Per-capita consumer spending (RMB) Retail sales value (RMB trillion) In 1H 2016, the total value of
retail sales in China reached Retail sales value
Per-ca ita consum tion e enditure of urban households RMB15.6 trillion and the per- capita consumption expenditure of urban households was
RMB11,185 (Chart 1).