Beijing Retail Real Estate Market Report 2011 4Q

Summary:

ECONOMY

The Eurozone debt crisis has cast a dark shadow over the global economy. In China, inflationary pressures have started to ease as the CPI growth declined by 1.3%, down to 4.2% in November. A slip is seen in the export increase rate while the manufacturing industry shrank with the official PMI down to 49.0 in November. The People's Bank of China announced a cut in the reserve requirement ratio by 0.5 percentage points on December 5, the first time since December 2008. The retail market in Beijing has seen a slip in Consumer Confidence Index (CCI) by 2.4 points, however, the coming festive holidays are expected to encourage consumer spending to some extent.

PRIME RETAIL RENTAL INCREASED SLIGHTLY 

The overall retail market in Beijing is active, reflected by a slight increase in the prime retail rental. The rental in the Xidan submarket was stable while other submarkets experienced some fluctuation. In the fourth quarter, the Wangfujing submarket continues to top the prime retail rental ranking, with the highest year-on-year growth among all. The rental levels in the CBD and Zhongguancun submarkets all increased to some extent, while Sanlitun saw a slight decrease in rental due to the decline of Sanlitun Village phase II.

OCCUPIER DEMAND REMAINED STRONG 

Retailer demand remains strong in the fourth quarter. Some international brands have opened new stores in key submarkets. Prime retail space in the CBD, Wangfujing and Sanlitun areas, such as CWTC Mall, Sanlitun Village, Shin Kong Place and Oriental Plaza are all popular locations for luxury brands. In terms of supply, some stores postponed their opening to next year. Shimao Department Store, CapitaMall Crystal and Galleria mall entered the market in December, taking up around 40% of the annual supply of shopping centers. The withdrawal of Pacific Malls from Beijing raised more concern for marketing, positioning, site selection, differentiation strategy and other factors affecting retail.

OUTLOOK 

Despite the large new supply, the prime rental level will not see significant change in 2012 due to the various locations and market positioning of new projects. Wangfujing will be a hot spot in 2012 with increasing retail supply and flagship stores opening (Forever 21 and Apple). Key projects in Wangfujing will undergo renovations with international brands competing for prime locations while projects are also trying to attract high-end brands.

Also, with the completion of Cuiwei CapitaMall and the Lafayette’s making an entrance, the retail market in 2012 will be exciting.