Apr 27, 2012
1Q 2012 | RETAIL
The Knowledge Report
Beijing
Beijing Retail Property Market
Market Overview
The economic fundamentals in Beijing remained fairly positive, with local residents' disposable income and consumption expenditure logging in double-digit growths, up 11.7% and 12.4% y-o-y, respectively. Meanwhile, Beijing's retail sales expanded by 14.3% y-o-y, to RMB183.6 billion as of end-1Q12. Supported by the economic growth, the development of Beijing's mid- to high-end shopping centre property market was largely stable during 1Q12. Despite a small uptick in the overall average vacancy rate, rents in most catchments continued to grow, and investment returns remained largely unchanged.
11.7%12.4% 14.3% 1,836 , 2012
ECONOMIC INDICATORS
Growth China GDP* Beijing GDP* Beijing CPI* Current Bank Rate Retail Sales* Disposable Income* Consumption Expenditure* 8.1% 7.0% 3.7% 7.05%^ 14.3% 11.7% 12.4%
Trends
* Data as of end-1Q12 ^ 5-year term lending rate Source: Beijing Statistics Bureau, PBOC
Supply
Vacancy
72,000 2012 469 4.06%
MARKET PERFORMANCE
Rents Overall CBD Chaoyangmen Jianguomen Xidan Wangfujing Dongzhimen Lufthansa Zhongguancun Financial Street Others
CapitaMall Crystal, located to the west of Chang An Avenue, had its grand opening during this quarter, adding a retail GFA of 72,000 sqm to the property market. Correspondingly, the total stock of the overall mid- to high-end shopping centre property market amounted to 4.69 million sqm as of end-1Q12, up 4.06% y-o-y.
Demand
The average vacancy rate of Beijing's mid- to high-end shopping centres was 10.09% at the end of the quarter, up 0.25 percentage point q-o-q. The vacancy rate inched up as a result of an anchor tenant's lease termination at a shopping centre in East Beijing's Chaoyang Road. Nonetheless, demand for quality retail space from many international and domestic retailers continued to grow in this quarter, bringing about an active leasing market. Some luxury brands were rather aggressive in renting
10.09%0.25 Chloe Loewe 200 250 Fendi 400Marni 120Dunhill
Lured by consumers' improved fashion tastes, some luxury brands actively expanded in Beijing.
OUTLOOK
Supply Vacancy Rents Capital Values
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The Knowledge Report | 1Q 2012 | Retail | Beijing
space at high-end shopping centres. For examples, Chloe and Loewe expanded their boutiques to 200 sqm and 250 sqm in Seasons Place, respectively. Fendi doubled its tenancy size to 400 sqm in China World Mall, while Marni also leased 120 sqm in the same complex. Dunhill committed 250 sqm at Parkview Green. Montblanc took up a whole block of a retail premise at the Village @ Sanlitun North zone to open its first concept store and its 101st Chinese store, which was four storeys. In 1Q12, watch makers and retailers were also anxious to expand in Beijing. For instance, Omega confirmed its in-door relocation, expanding to 180 sqm in Seasons Place. IWC signed for new spaces, taking up 300 sqm in Parkview Green and 100 sqm in Seasons Place, respectively. Fast fashion retailers remained keen in opening new stores or expanding their presence in Beijing. Cases included Hollister's lease of 1,200 sqm in Indigo after opening its first Beijing store at Galleria, and Evisu's and H&M's rental of 180 sqm in U-Town ll and 2,320 sqm in Indigo, respectively. The demand from F&B operators was still on the rise. Alfie Bar & Restaurant leased 285 sqm in Parkview Green, which was the fifth worldwide restaurant for the Dunhill Group. Golden Lake and the Red Been leased 680 sqm and 180 sqm in the Malls at Oriental Plaza, respectively.
Chart 1: Beijing Mid- to High-End Shopping Centre New Supply, Net Absorption and Vacancy Rates
250MontblancVillage 1012012 Omega 180IWC 300100
Hollister 1,200 Evisu H&M1802,320 Alfie Bar & Restaurant 285 Dunhill 680180
1
sqm |
500,000 400,000 300,000 200,000 100,000 0
Chart 2: Beijing Mid- to High-End Shopping Centre Ground Floor Rents by Catchment
2
RMB psm per month |
20% 18% 16% 14% 12% 10% 8% 6% 4%
1,800 1,600 1,400 1,200 1,000 800 600 400 200 0
Wangfujing Xidan Financial Street Lufthansa CBD Dongzhimen
3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 -100,000
2% 0%
New Supply |
Net Absorption |
Vacancy Rate |
Ground Floor Rents |
Source: Research, Colliers International, Beijing
Overall Average Rent |
Source: Research, Colliers International, Beijing
Rents
The average ground floor fixed rent in Beijing's mid- to high-end shopping centres rose by 3.97% q-o-q, to RMB795.76 psm per month by the end1Q12. The Wangfujing, Financial Street and CBD catchments had the most significant growths of 13.37%, 8.33%, 6.97% q-o-q, respectively. Wangfujing continued to be the most expensive retail catchment in Beijing, with rents averaging at RMB1,683.28 psm per month as of end-1Q12. By contrast, rents of the Jianguomen catchment declined considerably, by approximately 6.31% q-o-q, owing to the continued underperformance of some properties in the precinct.
3.97% 795.76 CBD 13.37%8.3 3% 6.97% 2012 1,683.28 6.31%
Investment
Beijing's retail property investment market was quiet in this quarter despite the upward drift of fixed rents, which continuously enhanced the capital values from most landlords' perspective. While income stream was
2012
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rather secured for existing retail properties, some developers were suffering from their residential development business, yielding a higher possibility of their retail assets being divested in Beijing. Although inquiry and valuation activities for several prime retail assets in Beijing increased during this quarter, there was no en bloc sales transaction, and yields for the mid- to high-end shopping centre properties stayed largely flat.
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Outlook
Against the backdrop of a slowing economic growth in China, both central and local governments are emphasising domestic consumption as the key engine for development. Accroding to the Beijing Government Work Paper 2012, various efforts, including providing consumption subsidies to residents, improving consumer credit services and upgrading commercial environment, will be taken to stimulate demand in the locality. On the other hand, increasing disposable income of local residents and further internationalisation of Beijing should ensure continous strong consumption power in the capital. As a result of property market repositioning and construction postponements, only four mid- to high-end shopping centre developments, with a total GFA of approximately 240,000 sqm, are expected to enter the market in the remainder of 2012. Considering their current leasing precommitments, Colliers International expects that these new supplies are unlikely to generate negative impact on the market, nor increasing the overall vacancy rate significantly at their openings. Local consumers are expected to be more rational and selective in terms of purchase as they are poised to show more diversed tastes in fashion and quality of retail products. Whilst some traditional luxury brands reportedly experienced a slip in their sales during the first quarter, other luxury labels that recently entered the local market, such as Bottega Veneta, enjoyed fast growing sales turnovers with dual stores in the same centre. This indicates a sustained demand from more diversified retailers, as well as the needs that shopping centre management should change in line with the evolving consumer tastes in a bid to enhance the mall's rental income. An increasingly wider range of brand mixes in the luxury retailing sector for those high-end shopping centres are inevitable over the next 12 months, although the overall scene of trade mixes for the majority of shopping centres in Beijing are expected to remain largely unchanged. In addition, Colliers International projects that demand from the home and lifestyle and F&B trades will continue to grow, underpinning rental level enhancement.
2012
Colliers International Property Services(Beijing) Co., Ltd.
Suite 502, Tower W3, Oriental Plaza, No.1, East Chang An Avenue, Dong Cheng District, Beijing, 100738, P. R. China
240,000
Amanda Gao Managing Director
North China Tel: 86 10 85181633 Fax: 86 10 85181638 amanda.gao@Colliers.com
Carlby Xie Director
Research, North China Tel: 86 10 85181590 Fax: 86 10 85181638 carlby.xie@Colliers.com Bottega Veneta
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