Mega-shopping centre flood ready for Games
Beijing continues to transform retail landscape
With the countdown to the opening of the Beijing Olympic Games well under way, nowhere is evidence of the preparations for the big event more dramatically on display than the city's transformed retail landscape.
In the rush to prepare for the Games and the influx of big-spending visitors, nine new retail centres were completed last year, adding a gross floor area of about 780,000 square metres to the 1.5 million sqmetres of retail space in the city.
Additionally, 26 new retail projects offering a further 2 million sqmetres of retail space will be launched this year, according to property consultant Savills. Seven of the projects are larger than 100,000 sqmetres.
Joan Wang, a senior manager at Savills' research and consultancy division, said the launch of the new projects in prime locations had already put downward pressure on the number of shoppers at older and smaller shopping centres.
For example, Shin Kong Place, which opened last year, is near the central business district and offers more than 110,000 sqmetres of shopping space. It has been positioned as the top international department store in the area, targeting high-income group shoppers. The development attracted high-profile tenants such as Prada, Gucci, and Chanel.
Ms Wang said the shopping centre also included a supermarket and middle-end consumer goods. 'Shoppers will definitely prefer to go to this all-in-one retail centre rather than visit a small retail centre,' she said.
However, these smaller shopping centres had not yet cut rents to retain tenants, she said.
Ms Wang said rents in some traditional high-end shopping areas such as Oriental Plaza and China World Trade Centre had remained firm and in some cases increased, despite the big supply of new retail space in the pipeline.
The average rent for ground-floor shopping space in prime centres stood at about US$120 per square metre per month, she said, representing a 15.3 per cent increase over 2006.
In the central business district, peak rentals were up to US$220 per square metre a month, Savills said.
Rentals had not fallen in these locations because the market view was that the surge in supply was temporary.
'The huge supply is only a short-term phenomenon,' said Lampson Lam, a general manager at Beijing Upper-Eastside Retail Asset Management.
Mr Lam estimated that last year every Beijing resident had 1.1 sqmetres of retail space, rising to 1.5 sqmetres next year. 'That may look like a lot of new supply coming on to the market, but demand is growing strongly as the population expands,' he said.
Other factors supporting rentals include the outlook for steadily increasing living standards and consumer spending that will continue to support the retail market after the estimated 550,000 domestic and overseas visitors attracted by the Games return home.
However, not all retail projects would weather the change under way in the sector and location would become more critical in separating the winners from the losers, Mr Lam said.
Centres at some distance from the core business areas would struggle, he said.
Savills expected rents at prime shopping centres to remain on an upward trend with an average growth rate of about 10 per cent, Ms Wang said.
A recent survey by Jones Lang LaSalle on retailer sentiment showed that all brands were keen to establish a presence in the city, as evidenced by dramatic pre-leasing activity in high-quality, well-located projects.
However, this demand would not benefit all developments, and it should be anticipated that lower-quality projects would suffer this year due to strong competition resulting from the influx of supply, Jones Lang LaSalle said.