Stable 3Q performance in Shanghai retail property market

KUALA LUMPUR: The Shanghai retail property market in the third quarter (3Q) of 2010 was generally stable, with vacancy rates in the overall market decreasing with strong demand from retailers, according to a Colliers report.

“Benefitting from the improved performance of new projects in the inner ring road area, the vacancy rate decreased in the quarter,” the research house noted in the Colliers International Knowledge Report.

Vacancy rates fell 9% due to strong demand in this quarter.

“Furthermore, strong completion for retail space in prime areas will likely lead to higher future rental rates and continued low vacancy rates in premium projects,” it added.

Retail sales value in Shanghai sustained a growth of 17.5% year-on-year in the first eight months of 2010. “The increase was driven by the effect of the Expo and the excellent performance of the F&B sub-segment,” Colliers said.

The F&B sector is the fastest-growing retail sector, while the community shopping mall is the fastest-growing property type.

There was minimal supply added to the market in 3Q, the report said, with the Xintiandi Style building adding over 310,000 sq ft to the market place.

The report also noted that there were several high-profile retail outlets launched, including the second Apple store in Hong Kong Plaza, which opened on the iPhone 4 launch date, and several other brands like new fashion store “Be U”, which opened at 353 Plaza.

There was little rental rate change during 3Q, while on the retail property sales front there was no major en bloc transactions. “Strata-title retail sales remained active,” Colliers said.

Qipu Road Area is selling well with the average price in the area around 100,000 yuan psm (RM46,470), with average transactions going for RMB15 psm for total price of between 1 to 2 million yuan.

In August, Colliers noticed that half of the buyers investing in retail properties were previous residential investors.

“Looking forward, the rental rates is expected to grow by 5% to 10% per year, with new supply in Shanghai’s suburban areas providing the majority of supply,” Colliers said.