32 RESEARCHSHAngHAi REtAil MARKEt REPORt Q3 2018 As street shop rents were lifted due to thegradual tenant-mix adjustments of NanjingEast Road and Huaihai middle Road,the Q-o-Q growth rate of prime streetshops was higher than that of shoppingmalls. The average ground-foor of majorshopping malls increased slightly by 0.5%to RmB62.4 per sqm per day, whilst that ofprime street shops increased by 1.9% toRmB55.0 per sqm per day.In Q3, the growth pace of averageground-foor rent of shopping malls innon-core areas remained same as thatin core areas. The average ground-foorrent of shopping malls in non-core areasincreased slightly by 0.4% to RmB27.8per sqm per day, while the averagerent of shopping malls in core areasincreased slightly by 0.5% to RmB62.4per sqm per day. Shopping malls which recorded rentalgrowth in core areas included RaffesCity in people’s Square, Hongyi plazaalong Nanjing East Road, Citic Squareand HkRI Taikoo Hui along NanjingWest Road as well as iapm alongHuaihai middle Road. In non-core areas,shopping malls with growing rentsincluded L’Avenue, In point and Hopsonone. In prime shopping areas, the asking rentsof small retail shops sized 50-80 sqmranged from RmB30 to RmB35 per sqmper day; while those of general retailshops sized 100-150 sqm ranged fromRmB18 to RmB25 per sqm per day.In the primary strata-titled sales market,retail property transactions exceedingRmB100,000 per sqm were stillconcentrated in Xinhua Red Star mall inminhang District. In Q2, 9 shops with unitprices over RmB100,000 per sqm in thisdevelopment were sold for an averageprice of RmB126,850 per sqm. Theaverage size of these transacted shopswas 50.6 sqm. In the third quarter (Q3), six shoppingmalls offcially opened or soft opened.Three of them are situated at HuangpuDistrict, two in pudong and one in Xuhui,bringing approximately 415,000 sqm ofnew retail space to the market, down15.3% compared with the previousquarter. The average ground-foor rent inShanghai’s prime retail areas increased1.1% quarter-on-quarter (Q-o-Q) toRmB58.7 per sqm per day (see Table 1).In Q3, the overall vacancy rate of majorshopping malls fell 0.4 percentage pointfrom the previous quarter to 14.4% (seeTable 1). In Q3, with the opening of several newretail malls and renovated malls, a goodnumber of new retail stores emerged.The market witnessed the opening ofa batch of medium-sized multi-brandboutique stores. Domestic fashion brandsRENTS &PRICES PRIME STREET SHOPRENT INCREASED BY1.9% TO RMB55 PERSQM PER DAY IN Q3 2018 The Shanghai retail property market was active with theopenings of several new shopping malls. The consumerdemand of physical stores improved due to the entry ofvarious new retail experiential stores.TABlE 1 Shanghai prime retail market indictors IndicatorQ3 2018 fgureQoQ changeOutlook(Q4 2018) New supply 415,407 sqm↓ 15.3% ↗ Ground foor rentRmB58.7 / sqm / day↑ 1.1%↗ Vacancy rate14.4%↓ 0.4%↘ Capital valueRmB269,000 / sqm↑ 0.3% ↗ Source: Knight Frank Research TABlE 2 Selected retail property leasing transactions, Q3 2018 DistrictBuildingFloor / unitTradeArea(sqm) HongkouSinar mas New BundLevel 3 unitFood & Beverage (F&B)424 Jing’anCitic SquareBasement 1 unitF&B140 Jing’anJAICBasement 2 unitF&B34 HuangpuLuoneLevel 6 unitsCinema4,600 PutuoGlobal HarborLevel 1 unitF&B150 Source: Knight Frank Research Note: all transactions are subject to confrmation TABlE 3 Selected retail property sales transactions, Q3 2018 DistrictBuildingFloor / unitArea(sqm) Price (RMB million) Price (RMB /sqm) PudongYifeng Times SquareLevel 1 unit33.93.396,562 HuangpuNew Richport TowerLevel 1 unit100.68.887,407 QingpuQingpu Wanda mall Level 1 unit58.85.390,841 MinhangXinhua Red Star mallLevel 1 unit117.810.286,594 MinhangRoyal TerritoryLevel 1 unit172.717.098,691 Source: Shanghai Real Estate Trading Centre / Knight Frank Research Note: all transactions are subject to confrmation.FIGURE 1 Shanghai ground-foor retail rents in prime areas are actively expanding in China, trying toexplore new retail store operating model. In the fourth quarter (Q4), we expectretail rents in Shanghai’s prime retailareas will increase steadily. Amongst, theaverage rents of major shopping malls willincrease by 2% Q-o-Q and street shopsmay remain stable.In the coming days, new retail formatsincluding trendy brands and shoes,accessories and jewellery, auto showroomand small-to-medium sized multi-brandboutique stores will be prevailing amonglandlords. Shopping malls scheduled to open in Q4include Sanlin Incity (90,000 sqm) andL+mall (120,000 sqm) in pudong, Sinarmas New Bund (110,000 sqm) and Landmark Centre (72,000 sqm) in Hongkou,as well as Xintiandi plaza (30,000 sqm) inHuangpu.Source: Knight Frank Research 20 25 30 35 40 45 50 55 60 Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3 200720082009201020112012201320142015201620172018 RMB/sqm/day5 研究报告上海商铺市场报告 2018 第三季 4FIGURE 2 Shanghai shopping mall annual supply and stockNew malls opened in Q3 included CapitaLand Luone and Bund Finance Centre inHuangpu, LC mall and Lite mall in pudong and Nanyang 1931 in Xuhui.For the existing retail stock, Shanghai Shimao Festival City in the people’s Square retail areare-opened in Q3 after 1.5 years’ closure for renovation.The North Building of Grand Gateway 66also reopened in the quarter after the large-scale renovation. Retail consumer demand remained strong amid the new retail trends. The total retail sales ofsocial consumer goods from January to August 2018 reached RmB 817.908 billion, an increaseof 8.0% year on year. SUPPlY & DEMAND In Q3, with the opening of several newretail malls and renovated malls, a goodnumber of new retail stores emerged. Themarket witnessed the opening of a batch ofmedium-sized multi-brand boutique stores.For examples, mia Fringe, with restaurants,lounges and retail space integrated at a totalGFA of 1,600 sqm, had its debut in Huaihai627 mall (originally known as Xue Bao mall).The first store of Italian-based departmentstore Coscia opened in Century Link with anarea of 600 sqm.Domestic fashion brands are activelyexpanding in China, trying to explore newretail store operating model. In September,domestic women’s wear oVV and casualmenswear AEX jointly opened the oVV lAEX global flagship store in Joffre 688 onHuaihai middle Road where ZARA store waspreviously located, stretching three floors witha retail store size of 1,900 sqm. In the samemonth, armed with T-mall, Spanish clothingbrand Zara was expanding its presence inShanghai with the opening of a “New RetailConcept” store – Shanghai Times SquareFlagship Store. The duplex store covers asite area of 1,500 sqm. The new QR codessystem adopted by the store helps to achievethe effective online–offline integration. In recent years, shopping mall operatorscontinue to seek for breakthroughs toupgrade their malls and thus increase thefootage. Indoor themed streets are welcomedby landlords and begin to emerge in manynew shopping malls. There are also manythemed areas in Shanghai like i-Land in JoyCity, Jing’an District, m Square on the groundfloor of mosaic and Village68, the themedarea for women’s life style in Citic Square.In Q3, with the opening of new shoppingmalls, new themed areas were launched,increasing the popularity and adding valueto shopping malls. Lane 1192 old Street ofShanghai on basement two level in CenturyLink recently opened in pudong. It featuresthe style of Shanghai city back in 1930s and40s by establishing a retro dining experientialrecreation area gathered by ChinaTime-honored Brand restaurants includingShen Da Cheng, Tai kang Foods, Lao DaFang and Da Hu Chun. Apart from attractingthe white-collar and residents around,Lane 1192 old Street of Shanghai hasalso attracted the elderly consumers agedbetween 50 and 70 since its opening withthe possibility of becoming one of the mostpopular tourist attractions in Shanghai. The themed area, Happily Ever After in thenorth zone of BFC was