Shanghai shopping malls poised for surge of new tenants chasing post-pandemic ‘revenge spending’ spree

At least 13 global chain-store operators have already set up or plan to open their first mainland Chinese shops in Shanghai this year
China’s exit from its zero-Covid strategy will unleash pent-up demand for packaged food and personal-care products, according to a study

China property

Daniel Renin Shanghai

Published: 3:00pm, 5 Feb 2023

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Owners of shopping malls in Shanghai can expect a rebound in occupancy rates as retail and catering brands step up to tap a wave of “revenge spending” now China has abandoned its harsh Covid-19 pandemic curbs, analysts said.

At least 13 global chain-store operators have already set up or plan to open their first mainland Chinese shops in Shanghai, the country’s commercial hub, this year, betting that the country’s reopening after three years of restrictions will spark a spending spree on food, clothing and cosmetics.

“In 2023, a strong recovery of shopping activities will be seen from the second quarter,” said Sherril Sheng, research director for the residential sector at JLL China. “More lease agreements will be signed as new-energy vehicle, personal care brands, garment makers and outdoor sportswear companies look to open new stores.”

The new signings will eventually boost the occupancy rate in the city’s major shopping streets, she added.

In 2022, lockdown measures and standstill orders to restrict people’s movement caused occupancy rates in the city’s shopping arcades to increase by 1.3 percentage points to 8 per cent, according to data provided by CBRE.

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Shopping mall ceiling collapses in China

Average rental costs for retail space at ground-floor level in the malls dropped 3.1 per cent on the year to 34 yuan (US$5.02) per square metre per day.

Sheng expects the downward trend to be reversed this year as occupancy and rental rates start to recover, buoyed by new stores opening.

“China’s vast market is still a big draw for consumer brands as the economy reopens,” said Chen Xiao, CEO of Shanghai Yacheng Culture, a marketing and branding company. “Many consumer goods manufacturers are looking to expand their presence in Shanghai with plans to open new stores in prime locations.”

The newcomers include Japanese food and drink maker Suntory’s first flagship store in mainland China, a high-end restaurant and bar at the Citic Pacific Plaza on Nanjing Road, French candle maker Trudon’s first outlet and Swiss furniture maker USM’s first shop at Xintiandi Plaza on Huaihai Road.

China’s exit from the zero-Covid strategy is set to unleash pent-up demand for packaged food and personal-care products, according to a joint study by global consultancy Bain & Company and market research firm Kantar Worldpanel.

Packaged food transactions jumped 7.4 per cent jump in value while the average selling price rose 2.6 per cent in the first three quarters of 2022. Home-care products reported a 6 per cent rise in transaction value and a 0.6 per cent increase in average selling prices.

Mainland China’s so-called Gen Z consumers, those born in the mid to late 1990s, will increase their purchases of cosmetics in a flurry of “revenge spending”, driving retail prices up as the Covid-19 pandemic eases, the study said.

“But landlords might be over-optimistic,” warned Zhou Shiyu, a senior official at Shanghai Join Buy, one of the city’s biggest commercial property owners.

“The economic fundamentals are not strong enough to support a big jump in consumer spending. We expect to see a mild recovery with a single-digit increase in both rental costs and occupancy rates.”

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