1savills.com.cn/research

MARKETIN

MINUTES

Savills Research

Retail Beijing – October 2020

One new retail project launches Beijing government develops multiple plans to help boost consumer demand and upgrade retail projects.

Savills plcSavills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 600 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.

“Beijing’s retail market only witnessed one new project launched during 2020. Some projects under construction postponed their launch times to 2021, and the citywide retail market remained flat. Additionally, the government developed several plans to help boost consumer demand, including consumption coupons and renovation/upgrading of pilot retail projects. ” VINCENT LI, SAVILLS RESEARCH

James MacdonaldSenior DirectorChina+8621 6391 6688james.macdonald@savills.com.cn

Vincent LiAssociate DirectorNorth China+8610 5925 2044vincentx.li@savills.com.cn

Anthony McQuadeManaging DirectorNorth China+8610 5925 2002anthony.mcquade@savills.com.cn

RESEARCH

CENTRAL MANAGEMENT

Savills teamPlease contact us for further information

• Retail sales decreased 14.1% year-on-year (YoY) to RMB815.04 billion in the first eight months of 2020, while general retail and F&B sales fell 11.6% YoY and 41.2% YoY to RMB767.54 billion and RMB47.5 billion, respectively.

• Yanqing Wanda Plaza made its debut in Q3/2020, the very first retail project in 2020, bringing around 92,000 sq m of retail GFA to the market. Positioned as a comprehensive shopping mall rare in the outskirts of the city, Yanqing Wanda Plaza significantly improves the retail atmosphere in Yanqing District.

• Citywide shopping mall vacancy rate reached 10.7%, up 1.0 percentage point (ppt) quarter-on-quarter (QoQ) and 4.4 ppts YoY.

• Citywide shopping mall first-floor rents reached RMB849.4 per sq m per month in Q3/2020, and the rental index decreased 0.2% QoQ and 0.5% YoY.

• Average prime first-floor rents hit RMB1,276.0 per sq m per month by the end of Q3/2020, and the rental index decreased 0.3% QoQ and 1.2% YoY.

• Average non-prime first-floor rents registered RMB689.2 per sq m per month by the end of Q3/2020, and the rental index decreased 0.4% QoQ and 0.2% YoY.

• The Beijing government developed several plans to further help boost consumption and upgrade existing retail projects including the “First-Store Economy”, “One Policy for One Retail Store” renovation plan and others.

2savills.com.cn/research

Source Savills Research

GRAPH 1: Shopping Mall Annual Supply, 2015 to Q3/2020

0.0

0.2

0.4

0.6

0.8

1.0

1.2

2015 2016 2017 2018 2019 Q1-Q3/2020

mill

ion

sq

m

GRAPH 2: Vacancy Rates In Each Submarket, Q4/2015 to Q3/2020

Source Savills Research

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Q4 Q1

Q2

Q3

Q4 Q1

Q2

Q3

Q4 Q1

Q2

Q3

Q4 Q1

Q2

Q3

Q4 Q1

Q2

Q3

2015 2016 2017 2018 2019 2020

Citywide Xidan WFJ CBD

Sanlitun Lufthansa E2R ZGC

GRAPH 3: Rental Indices In Each Submarket, Q4/2015 to Q3/2020

Source Savills Research

Source Savills Research

80

130

180

230

280

330

Q4 Q1

Q2

Q3

Q4 Q1

Q2

Q3

Q4 Q1

Q2

Q3

Q4 Q1

Q2

Q3

Q4 Q1

Q2

Q3

2015 2016 2017 2018 2019 2020

Q1/

20

08

=10

0

Citywide Xidan WFJCBD Sanlitun LufthansaEast 2nd Ring Road ZGC

SUPPLY AND DEMAND Retail sales decreased 14.1% YoY to RMB815.04 billion in the first eight months of 2020, while general retail and F&B sales fell 11.6% YoY and 41.2% YoY to RMB767.54 billion and RMB47.5 billion, respectively.

Yanqing Wanda Plaza made its debut in Q3/2020, marking it as the very first new project to enter the citywide retail market in 2020, contributing around 92,000 sq m of retail GFA to the market. Positioned as a comprehensive shopping mall rare in the outskirt areas of the city, Yanqing Wanda Plaza significantly improves the retail atmosphere in Yanqing District and brings new energy to the local retail market.

Beijing’s retail market is still recovering from the fallout of COVID-19. Local governments continued to develop several plans to help boost consumption, like further developing the night economy by extending the operating time of shopping malls and commercial streets. The “One Policy for One Retail Store” plans were also introduced to renovate and upgrade projects like Silk Street, Joy Breeze Daxing, WDK Shopping Mall and others to meet current market standards.

RENTS AND VACANCY RATESThe citywide retail market had resumed to some extent in Q3/2020, but brand adjustments and leasing activities of shopping malls were still impacted to different degrees. Shopping malls based in prime submarkets remained popular in leasing and exhibited more resilience under market uncertainties with healthy brand adjustments and multiple new shops opening during the quarter. Non-prime shopping malls, on the other hand, faced greater difficulties and saw noticeable increases in vacancy rates. The citywide shopping mall vacancy rate reached 10.7%, up 1.0 ppt QoQ and 4.4 ppts YoY. The

average vacancy rate in prime submarkets edged up 1.1% QoQ and YoY to 5.3%. Non-prime submarkets saw their average vacancy rate reach 13.0%, up 1.5% QoQ and 6.3% YoY.

The increased vacancy rate hurt citywide rental growth, with some landlords adjusting their rental levels accordingly. Citywide shopping mall first-floor rents reached RMB849.4 per sq m per month in Q3/2020, and the rental index decreased by 0.2% QoQ and 0.5% YoY. Average prime first-floor rents hit RMB1,276.0 per sq m per month by the end of Q3/2020, and the rental index was down by 0.3% QoQ and 1.2% YoY. Average non-prime first-floor rents registered RMB689.2 per sq m per month by the end of Q3/2020, and the rental index decreased 0.4% QoQ and 0.2% YoY.

MARKET OUTLOOK The COVID-19 outbreak during 1H/2020 postponed construction and launch times of several retail projects in Beijing. However, since the citywide retail market saw work resumption in Q3/2020, new supply is expected to hit the market on schedule. It is expected to see two new shopping malls opened in Q4/2020, Joy Breeze Daxing and Dongba Wanda Plaza, bringing 330,000 sq m of retail GFA in total to the citywide market.

As COVID-19 has been effectively contained, shopping malls saw their physical turnover volumes improve. Plans to boost consumption by the government were remarkably effective—consumption coupons increased consumer demand both online/offline and catering and night consumption helped the retail market see a resurgence. “Beijing Consumption Season”, an official event organised by the Beijing government, and started in June, will be open until the end of December 2020, and the recovery of consumer demand will continue to be promoted in the citywide retail market.

Note Calculation of rental indices starts from Q1/2008 for all submarkets except for Sanlitun and Lufthansa starting from Q3/2008

Retail

TABLE 1: Selected Future Projects, Q4/2020

PROJECT LOCATION DEVELOPER RETAIL TYPE RETAIL GFA (SQ M)

Joy Breeze Daxing

Daxing District Grand Joy Holdings Shopping Mall 150,000

Dongba Wanda Plaza

Chaoyang District Wanda Group Shopping Mall 181,800