Luxury retailers snap up prime space in Shanghai

SHANGHAI: Susan Lawrence, who left her hometown in Mississippi in the US six months ago to live and work in Shanghai, has mixed feelings about her new living environment.

"There are almost too many shopping malls and they all look the same," says Lawrence, who works for the American Chamber of Commerce.

The daily commute to work takes Lawrence to Nanjing Road, where her office is located among a crush of retail centres, almost all of which are devoted to selling luxury goods.

Among them is the newly opened retail portion of the Peninsula Hotel, the first new building on the Bund in 83 years. The project has added 6,500 sq m to Shanghai's stock of prime retail space and showcases the wares of international luxury brands, such as Chanel and Prada.

But the younger generation of expatriates to which Lawrence belongs are unimpressed by all that luxury and the high prices that go with it.

"We are young people. We want to save money," says Lawrence, who adds that she finds it difficult amid all the upmarket retailing to find home-spun mid-priced quality products.

Eugene Tang, Jones Lang LaSalle's head of retail division in Shanghai, agrees. In anticipation of strong demand from wealthy mainlanders, many high-end retailers have looked for opportunities to expand in the city by gaining footholds in prime shopping centres, he says.

"Wealthy mainland people love luxury brands. Mid-priced brands find it difficult to get domestic customers," he says.

But Tang says expatriates like Lawrence will see changes soon as a number of international mid-priced brands, such as Gap and Banana Republic, are planning to open in prime shopping areas in the wake of the growing middle-income group.

The financial city so far has a number of established prime shopping areas including Nanjing West Road, Nanjing Road East, Huaihai Road, the Bund and Lujiazui that focus on high-end products.

Luxury retailers have resumed their expansion plans with confidence as Shanghai prepares for the World Expo, which will open next month, according to Jones Lang LaSalle's latest report.

On the back of the strong demand, average ground-floor rents for prime retail space had risen 1.1% quarter on quarter to 49.40 yuan (RM23.03) per sq m per day at the end of last month.

According to Jones Lang LaSalle, between 450,000 and 500,000 sq m of new retail space will be added to Shanghai's retail sector every year until 2012, but growth will then drop to about 100,000 sq m a year in 2013 and 2014.

For people like Lawrence, says Lee Hing-yin, a director of Colliers International's research and advisory department, the solution is to shop in fringe areas next to prime districts.

One area is Plaza 889, located at the intersection of Wanhangdu and Changshou roads. The family-oriented shopping centre has a gross floor area of almost 50,000 sq m in nine floors, according to Jones Lang LaSalle.

Another place is Guosun Centre in Changfeng, being developed by Singapore-based GuocoLand.

But Lee says it will take time for these shop centres to become attractive and this will only happen when a new metro line is built in the area. – South China Morning Post

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