The development of Shenzhen’s retail property market

Shenzhen retail property market squarefoot China Insight

In recent years, the track record of Shenzhen’s rapid economic growth shows that more and more shopping malls have come into the market and has led to upgrades in business and further development in areas close to the retail projects.

The total transaction value in Shenzhen’s retail spaces reached RMB13.3 billion last year, up 60.2% y-o-y with the average transaction price per square foot the highest among first-tier cities. In fact, vacancy rates in urban shopping malls remain at a low level, whilst suburban shopping malls have shown some signs of achieving full occupancy. From this data, despite the continued high of new supply, the short- to medium-term prospect of Shenzhen’s retail property sectors should not be neglected.

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As a result of the developers’ careful planning on the layout of each mall, newly completed shopping malls have gained significant traction. Apart from keeping in line with retail shopping, dining and entertainment facilities, several malls have different themed layouts on each floor. Moreover, brands undergo a series of strict tests to be selected to open in a shopping mall, with most of them debuting their brand for the first time in Shenzhen. However, at the same time, Michelin restaurants and certain brands’ flagship stores are selected to help provide the highest international living standards to the public. To avoid direct competition from the wave of supply, some developers have smartly adjusted the timing of their launch dates.

According to industry sources, there will be twenty-four new shopping mall developments in 2018 with small-sized projects dominating the market. Of which, seven will be medium-sized projects and five will be large-sized projects. They are expected to become popular landmarks shortly after being launched. Given the continuous surge in new supply, competition among developers and shop owners will be further intensified. To mitigate the increase in vacancy risk and to slowdown the saturation of the city’s shopping malls, we see both new and existing shopping mall owners paying more attention to carefully selected themes for their retail space. It will bring a richer and more convenient living experience not just to Shenzhen residents, but also to visitors outside the territory. Driven by business opportunities from Shenzhen’s younger demographic, we will see a 5% rental growth with a mild improvement in average vacancy in the city’s retail property market this year. 

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