HOW MUCH RETAIL SPACE DO 1.3 BILLION CONSUMERS NEED?
11 Jan, 2012, CHINA
According to the latest report of Cushman & Wakefield, - How Much Retail Space Do 1.3 Billion Consumers Need?- China's retail market is going through a phase of rapid development, as an emerging middle class, a growing consumer culture and increasing spending are vastly changing the retail scene.
In terms of retailer growth, department stores hae expanded and still command a strong market position, with operators sucha as Parkson, Wangfujing, Moi and Pacific constituting a national presence. Hypermarket-archored neighborhood centers of 15,000 square meters (sq m) to 30,000 sq m have grown rapidly, with Carrefour, Wal-Mart and Huarun Vanguard leading the way. Shopping centers have become more ambitious in scope, with larger areas leased to other retailers, and they are beginning to play a more important role in the first and second tier cities' retail market
In recent years, changes in government policy have encouraged major listed residential developers to focus more on commercial development, and companies such as Vanke, Greenland Group,Poly and Sino Ocean Land have begun to invest in retail property development. The trend of most concern is that a wide range of local developers are now looking at retail development for the first time, and smaller local developers with relatively little experience in retail development are often building shopping centres of over 100,000sq.m
In terms of fashion, luxury brands, though already in China for over a decade, are now placing considerable importance on the market. Greater China has overtaken Japan as the world's No.2 luxury market after the United States. Mid-market and fast-fashion brands are more recent additions to the market , but are expanding even more rapidly. Brands such as H&M, ZARA and Uniqlo are now staples in China's better mid-market shopping centers. Accessible local fashion brands such as Metersbonwe have now expanded nationally, as have sports apparel brands Nike and Adidas, with several thousand stores nationwide. Overall demand from retailers is exceptionally strong. China's top 100 retailers experienced average sales growth of 21% in 2012 and expectations for the coming two years are similar.
Strong development activity is leading to growth in the average area of shopping centre space per capita across China. Current space per capita in major Chinese cities ranges from around 0.1 sqm to 0.6 sqm gross floor area (GFA). In most cities, the per-capita supply is anticipated to grow vigourously over the coming three years, and in all cities there are many more retail projects in the early stages of development the growth will remain strong in the medium term.
It is difficult to assess what the right amount of shoping-centre supply is for a Chinese city. In Hong Kong, which benefits from strong retail spending by tourists, per capita shopping centre space is now around 1.4sq m gross, while in Europe, where the high street still plays an important role, Norway offers the highest shopping-centre space per capita at 0.7 sq m net. In the United States, benchmarks are higher, with 2.2sq m per capita on average.
James Hawkey, Executive Director of Retail Services for Cushman & Wakefield, commented, "While demand growth is extremely stron, the rate of increase in suppy may be stronger if not kept in check. In many Chinese cities, we are starting to see problem shopping centers, which are often poorly designed and managed and have been unable to create an attractive tenant mix. We anticipate more problem centers emerging over the coming year, where inexperience developers are undertaking over-ambitious projects. Over the coming two to three years, it is probable that signs of over supply will start to be visible in many Chinese cities. The coming several years will show continued spectacular growth in the market as Chinese consumers start to broaden their retail horizons. This growth offers an unmatched investment opportunity."