Sun Hung Kai Properties

Shanghai closing in on HK as shopping mecca: SHKP

PUBLISHED : Tuesday, 20 December, 2011, 12:00am
UPDATED : Tuesday, 20 December, 2011, 12:00am

Shanghai shop rents are showing signs of catching up with those in Hong Kong, buoyed by growing demand from big global brands hoping to capture a slice of wealthy mainland shoppers' demand for luxury merchandise.

The mainland's commercial capital could soon rival Hong Kong as a luxury shopping destination, according to Maureen Fung Sau-yim, a general manager in the leasing department at Sun Hung Kai Properties (SHKP).

She said rents for prime retail space in Shanghai were about half that of Hong Kong but the gap was steadily narrowing.

'The gap in rentals between the two cities will narrow, based on the huge potential in the vast mainland market. China's luxury goods sales will remain robust and give a boost to top-quality shopping malls,' Fung said.

SHKP, Hong Kong's largest developer by market capitalisation, has announced it will launch the second phase of its HK$10 billion Shanghai IFC Mall in the third quarter of next year. It expects to bring a dozen or more new brands and restaurants to the buoyant market.

'We have seen a rising ardour from international brands for prime retail space in Shanghai since the global economic woes have had such a huge impact on their businesses,' Fung said. 'It is safe to anticipate a flourishing mainland retail market in the coming years.'

About a quarter of the 60 tenants signed up for the second phase of the Shanghai IFC Mall at Pudong's Lujiazui area would be new entrants to the mainland, Fung said.

She forecasts the annual rental income for Phase 1 could reach HK$400 million.

Commercial rents at Lujiazui are between 25 and 40 yuan per square metre per day, according to the property consultancy Savills.

Shanghai, although larger than Hong Kong, still lacks high-end shopping malls with modern infrastructure and efficient management.

The consulting firm Bain & Co expects the mainland's luxury goods market to grow as much as 30 per cent, to 113 billion yuan (HK$137 billion) this year, the fastest growth worldwide.

The IFC Mall in Pudong has attracted thousands of newly affluent shoppers from other parts of the mainland who are eager to own luxury watches and handbags.

When SHKP opened the shopping centre last year, analysts called it a breakthrough because it changed the retail landscape of the eastern side of Huangpu River.

It was the first new high-end shopping mall in Pudong in the past 10 years.

Lujiazui, a finance and trade zone, is home to the Shanghai Stock Exchange and the Shanghai headquarters of the central bank.

It is also the commercial hub of the Pudong district, Savills said in a report.

'The rents for commercial properties at Lujiazui are set to climb amid the increasing occupancy rates in the region's office buildings,' it added

SHKP, along with Hong Kong rivals such as Kerry Properties, are accelerating expansion on the mainland despite the slowing economy. Kerry will launch its 450,000 square metre mix-use development, Jing An Kerry Centre, in Puxi next year.

'A slowdown is not a primary concern now since the government has decided to expand domestic demand to boost the economy,' Fung said.

'As the authorities continue their efforts to restrict home purchases to cool the residential property market, well-to-do mainlanders will in future have more cash to spend on luxury goods.'


The number of tenants who have signed up for the second phase of the Shanghai IFC Mall at Pudong's Lujiazui area