Asian Cities Report Guangzhou Retail - 2H 2017 Savills World Research China
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2H 2017
Savills World Research
China
Asian Cities Report
Guangzhou Retail 2H 2017
savills.com.hk/research
savills.com.hk/research 01
Asian Cities Report | Guangzhou Retail
MAP 1 City overview occupancy rates. In response to the
Guangzhou retail areas Guangzhou, known as the nation’s vacancy challenges, operators have
commodity trade centre, is home to chosen to replace traditional retailers
the largest trade fair in China – “The (clothing and other goods) with
Open after 2013
Open before 2013 Canton Fair”. The Canton Fair is held Food & Beverage (F&B) and modern
twice a year and attracts merchants services tenants. However, these
from around the world. These types of tenants cannot afford retailer
merchants and wholesalers fill up retail equivalent rent prices. Consequently,
streets across the city, offering an array average Yuexiu rents have edged
of goods and specialty items. The lower.
festival reflects the Guangzhou retail
market’s ongoing significance. Tianhe Road
The government’s plan to extend
Forbes named Guangzhou the best new business development east has
city for business in China for three improved Tianhe Road’s commercial
years running from 2013 to 2015, and retail environment. As a result,
while a report co-authored by PWC Tianhe Road owns the highest rent
and CDRF1 named Guangzhou as prices in the city, while also maintaining
the Chinese city with the greatest some of the lowest vacancy rates.
Source: Savills Research
NB: Does not include Panyu New Town growth opportunity in 2016 and 2017. Tianhe road’s tenants are some of the
Both confirmed its retail and business most sought-after in the world, which
competitiveness. include but are not limited to high-
end clothing and accessories, luxury
GRAPH 1
Guangzhou’s retail market is the jewellery, premier restaurants, niche
Shopping mall vacancy rates by district, largest in Guangdong with sales having specialty stores, and other well-known
1H/2016 vs 1H/2017 increased 8.7% year-on-year (YoY) to F&B stores. It has since surpassed
RMB457 billion in 1H/2017. Yuexiu as the biggest prime retail area
1H/2016 1H/2017
25% in Guangzhou.
Retail market overview
20% Guangzhou’s retail market has Zhujiang New Town
evolved from large department stores Despite having a mature business
to multi-purpose, modern services environment, Zhujiang New Town
15%
shopping malls. Nevertheless, some (ZNT), located in Tianhe District,
department stores established in remains an emerging retail area.
10%
the late 1970s still operate despite Surrounded by a large white collar
relatively poor performance, including workforce, the ZNT malls cater to
5%
Friendship Store (Huanshidong mid- and high-end consumers. The
Road), Xin Da Xin department store majority of ZNT retail space is located
0% and GrandBuy (both located on at the ground level, directly below (and
Tianhe Yuexiu Zhujiang Liwan Haizhu Baiyun Panyu Overall
Road New Town Beijing Road). These stores continue immediately accessible from) the office
to see downside pressure from buildings. New openings include the
Source: Savills Research gradually higher rents, changing 2016 launch of International Grand
consumer brand preferences and Plaza, and the Q4/2017 launch of K11
more diversified shopping channels. mall.
GRAPH 2 Shopping malls first emerged in Yuexiu Stock
Retail stock distribution, Q2/2017 vs 2019 district but rapidly expanded eastward Guangzhou’s prime retail stock area
along Tianhe Road. Tianhe Road’s first topped 4.6 million sq m by the end of
prime shopping mall (Teemall) opened Q2/2017, most of which was mid- to
in 1996. Tianhe Road and Yuexiu high-end shopping malls. Tianhe Road
2019 district continue to be the two prime (1.16 million sq m) and Yuexiu district
retail areas in Guangzhou despite (640,000 sq m) are the two biggest
increasing competition from other markets, individual non-prime areas
Q2/2017 37.7% areas2. are approximately 300,000-400,000
43.3% sq m.
Prime areas
Yuexiu
Emerging areas
56.7% Yuexiu rents are some of the Emerging areas are experiencing
62.3% highest in the city, given the area’s rapid development - market share
central location and accessibility. is expected to increase from 56%
However, due to aged facilities and to 62% by 2019. Baiyun and Panyu
dated management styles, Yuexiu districts will receive large-scale supply.
mall operators are currently facing Teemall Panyu and Clifford Mall Panyu
difficulties attracting/retaining leading are expected to launch in 2018, while
Source: Savills Research tenants and achieving satisfactory Baiyun New World will open in 2019.
022H 2017
Rents and vacancy However, luxury brands are expected GRAPH 3
to maintain conservative expansion
The broader Guangzhou retail market Shopping mall rental indices, Q1/2009–
is expected to experience greater plans in response to fierce competition
from Hong Kong and diverse online
1H/2017
competition, driven by new supply in
emerging and suburban areas, and the retail channels. Health and sporting Overall Prime Non-prime
continued growth of online shopping goods sales are trending higher, as 125
alternatives. consumers place greater emphasis on
120
wellness and overall self-appearance;
Recent tenant-mix adjustments premium sporting brands and fitness 115
increased city-wide vacancy rates centres should continue to benefit.
Q1/2009 = 100
110
by 1.3 ppts to 5.7% in 1H/2017. The
vacancy rate is expected to move F&B and lifestyle brands are both 105
higher as significant new supply hits expected to expand store areas and
the market in the next three years. networks. Most newly committed 100
F&Bs are chasing medium-sized
95
First-floor rents have shown some gross floor area (150-600 sq m) due to
volatility over the last six quarters. cost efficiencies and strategic space 90
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Tenant-mix adjustments are a culprit, advantages. This includes: HEEKCAA
as a greater number of F&B/lifestyle (specialty drink shop), Putian
Source: Savills Research
stores will bring down first-floor Restaurant (one-star Michelin Fujian
averages. Additionally, a large spread cuisine), and The Pizza Factory.
exists between prime and non-prime
rents, with Tianhe Road at RMB1,078 Market outlook GRAPH 4
per sq m per month (psm pmth), and Guangzhou is expected to receive
1.5 million sq m of new supply from Life-style stores by retail area, 1H/2016 vs
non-prime locations at RMB377 psm
pmth, creating dispersion amongst 2018 to 2020. The majority of new 1H/2017
city-wide prices. supply will be large malls in emerging
1H/2016 1H/2017
areas that support the needs of the 60%
Retailers surrounding community.
50%
Mall operators have adopted new
strategies resulting from greater It will take time for the market to
competition and more demanding absorb the large amount of expected 40%
consumers. These new strategies new supply in the coming years.
30%
include: improving tenant mixes, Landlords will have to focus on
reinventing space to offer better family introducing experiential retailers and
20%
experiences, and introducing creative unique tenants to attract satisfactory
service options to entice consumers. footfall. Other operators may focus 10%
The percentage of retail space given their attention on rent discounts and
over to lifestyle stores correspondingly other incentives, in an attempt to 0%
Tianhe Yuexiu Zhujiang Liwan Haizhu Baiyun Panyu Overall
increased to 37.9%, up 2.2 ppts YoY. attract high-quality brands. Retail Road New Town
rents will therefore experience some
Examples include the Aquarium downside pressure in the near-term. Source: Savills Research
at Grandview Mall (January 2016),
which initially did not receive positive
feedback, but eventually ended up
GRAPH 5
attracting families with young children.
The Haizhu R&F Centre, G5 Malls and Total GFA of newly committed F&B tenants,
Aeon Mall subsequently introduced 1H/2017
children’s playgrounds. Many of these
malls started rolling out children’s 10%
attractions and other ‘ticketed-entry’ 20%
family programmes to attract and keep
consumers at the mall. Various pop-up
stores also emerged; include those
600 sq m
Four other prime shopping malls have
introduced mini-KTV booths called
34%
Minika, designed for two people and 1 China Research Development Foundation
(CRDF) and PWC www.pwccn.com/en/research-
rented at 15 minutes intervals. and-insights/chinese-cities-of-opportunities-
2017-report.html .
2 Emerging areas include Baiyun New Town,
Luxury product sales have shown Jiangnanxi/Pazhou, Shangxiajiu, Zhujiang New
some encouraging signs recently. Town, and Panyu New Town. Source: Savills Research
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