Retailers should expect a short-term polarised performance in Guangzhou retail property market. Many retailers should continue to view Tianhe Bei Road and Yuexiu as their first choice when entering the market, but emerging areas like Zhujiang New Town, Liwan, Haizhu, Baiyun and Panyu should be put on hold to have higher take-up and optimal tenant mixes.
For the first five months of 2014, annual growth in wholesale and retail sales stood at 15.2% to RMB 269.8 billion. A combined total gross floor area of over four million square feet in total retail market stock will likely be seen by the end of 2014, translating into a 15% Y-o-Y gain, which is said to be the highest level in the past three years. New retail properties to be launched will be at peak in the fourth quarter, including Panyu Wanda Square and G.T. Land Seasons Mall. Given the concentration of projects in emerging locations, such as Panyu district and Zhujiang New Town, it will certainly take time for the market to absorb the new supply, even when the current retail sales remains solid.
Despite the mounting new supply pressure, rent in mature prime areas such as Tianhe Bei and Yuexiu will be hovered above RMB 1,000 per square metre per month. Rent in other emerging locations should stay below RMB500 per square meter per month on increased new supply and immense competition for potential tenants for proper tenant mixes. The extra downside risk in rent in these areas should be inevitable in the long run.
Meanwhile, catering trade in Guangzhou retail amounted to RMB38.9 billion, which has increased 7% Y-o-Y for the five months of 2014. F&B and leisure brands have appeared to have taken active roles in market expansion, with a GFA of 1,200 square metres of space leased by Green Tea. On the other hand, fashion brands have become cautious in their business expansions and opening new stores, with brands such as Uniqlo, H&M and Tommy Hilfiger leasing a combined floor area of 2,200 square metres.
A small decline in average rent to RMB660 per square metre by the end of this year is likely to be seen, dragging by the lackluster retail market on massive new supply in emerging areas and expected slower retail sales. Amid the surging sales through the internet, many landlords of retail shops have been paying attention to tenant mix positioning, brand diversification and professional retail properties management, lending a solid support to the development of retail shops in Guangzhou.