Commercial realty booms in Shanghai
Unlike other Chinese cities where there are worries of an oversupply in commercial space, the scene is very much vibrant in Shanghai.
After opening Westgate Mall 18 years ago on West Nanjing Road, Cheung Kong Property Holdings Ltd, owned by Hong Kong business tycoon Li Kashing, will launch a brand new commercial project in the city’s Pudong New Area.
Named Century Link, the commercial complex consists of a 140,000 square-meter shopping area and twin-tower office buildings. It is expected to be operational in 2016.
The Westgate Mall became a landmark after it opened, and the same is expected of the new project in the future, said Wilson Yeh, assistant director and general manager of Shanghai and Changzhou, Cheung Kong Property Holdings Ltd.
According to Yeh, the project is located in an intersection of four metro lines, where a daily passenger flow of 300,000 will benefit the new mall.
On the city’s western side, another commercial project Hongqiao Tiandi, or the Hub, developed by China Xintiandi — a separately managed and wholly owned subsidiary of Shui On Land — will commence business later this year.
With a land area of 62,000 sq m, Hongqiao Tiandi consists of a 380,000 sq-m commercial complex, including office space, shopping area, restaurants, entertainment, and recreational center.
The project will benefit directly from the more than 1 million passengers that pass through the Hongqiao transportation hub.
“More passenger flow will be brought by the nearby National Exhibition and Convention Center’s year-round exhibitions, as well as the 3 million residents living within 5 kilometers,” said Thomas Tam, executive director of commercial, China Xintiandi.
Shui On Land aims to make the Hub another successful landmark as its Xintiandi in downtown does.
Supply of commercial properties has been increasing over the past years, and there are no signs of a slowdown in the coming year, said Joe Zhou, head of research for international real estate service provider Jones Lang LaSalle (JLL) East China.
In the past five years, Shanghai’s office space supply has doubled, with another 1.5 million sq m to be made available within this year. In the next three years, the city’s annual retail property supply will be 1 million sq m.
“The high supply of office volume is consumed by the rising demand, such as from the development of China (Shanghai) Pilot Free Trade Zone, which has become an engine for related industrial’s expansion in Shanghai,” said Zhou.
The retail sector is more like a tenant market now, which means tenants are in a favorable position in deciding rental locations and prices.
The increasingly high density of retail space makes it more difficult for inexperienced developers to survive.
Nationwide, oversupply worries are growing as more Chinese shopping centers are built.
Net increase of commercial space reached 120 million sq m in 2014, according to the National Bureau of Statistics. This is in stark contrast to China’s “New Normal” of a continued deceleration in overall market growth for fast-moving consumer goods, according to the latest report from Bain & Co.
According to the report, growth of fast-moving consumer goods market dropped from nearly 12 percent in 2011 and 2012 to 4.4 percent during the first quarter of 2015.
Analysts and business insiders remain positive about the outlook of Shanghai’s retail sector, especially with regard to the city’s important economic status and its ever-strengthening consumer ability.
More focus should be given to shopping malls’ entertainment function rather than shopping function, as it used to be, Zhou suggested.
“The Free Trade Zone is only the first step in the city’s great expectations of economic development, and we see a lot more financial talents joining the city in the near future, whose great consumption power cannot be ignored,” said Tam.