Knight Frank and Holdways have published the latest China Retail Property Market Watch 1H 2016 report.
To attract footfall, a number of landlords adjusted the tenant mix in their shopping malls by allocating more space to food and beverage operators and leisure retailers. As these retailers have lower rental affordability, five out of the seven major Mainland cities covered in this report recorded rental declines during the first half of 2016 (1H 2016).
Mid-range retailers have become the major demand driver as a result of the government’s anti-corruption policies and slower economic growth. Fast-fashion retailers, in particular, were the most active in seeking prime retail space for expansion.
The rapid development of online shopping continues to pose a challenge for traditional bricks-and-mortar retailers. A number of major retailers launched online stores during the period. On the other hand, more online retailers have adopted the Online-to-Offline (O2O) model.
Retail supply will be abundant in the coming year, which will put downward pressure on retail rents. As a number of theme parks will be built in China, which will lend support to tourism and thus the retail market, the long-term outlook for China’s retail market remains optimistic.
Looking ahead, David Ji, Director, Head of Research & Consultancy of Greater China at Knight Frank expects competition from online retail, the ongoing anti-corruption campaign and Chinese buyers’ increasing overseas purchases will remain major challenges in the retail market, especially for high-end retailers, while fast-fashion and other mid-range retailers are expected to continue entering or expanding in China.