China however, is not far behind, with 145 million online shoppers. The Chinese government has heavily subsidized the ro
RETAIL SERVICES
GLOBAL CITIES RETAIL GUIDE
CUSHMAN & WAKEFIELD
CUSHMAN & WAKEFIELD 2012/2013
china
Global Cities Retail guide
china Overview
Photo / trioptikmal on Flickr
The People’s Republic of China (commonly known as China or the PRC) is located in east Asia.
A decade of strong economic growth, rising household incomes, and rapid urbanization coupled with government initiatives aimed at boosting domestic consumption have fueled rapid growth in China’s retail sector. With international brands overwhelmingly positive about China’s potential as a retail market, China is becoming key to business strategies of many global retailers. For many retailers, China is a must-win market and according to WLA (World Luxury Association) it is now the world’s second largest luxury market.
CUSHMAN & WAKEFIELD
Global Cities Retail guide
china Economic Overview
Photo / HBarrison on Flickr
economic summary
economic breakdown
ECONOMIC INDICATORS*
2009
2010
2011F
2012F
2013F
Population
1.347 billion (2011)
GDP growth
8.7
10.3
9.2
/
/
GDP
47.16 Trillion RMB (2011)
Consumer spending
9.1
9.8
/
/
/
Public sector balance
N/A
Manufacturing production
9.5
12.2
10.6
/
/
Governing Party
Communist Party of China
Investment
30.1
23.8
23.6
/
/
Head of State
Hu Jintao
Unemployment rate (%)
4.3
4.1
4.1
/
/
Prime Minister
Wen Jiabao
Inflation
-0.7
3.3
5.4
/
/
Election date
Mar 2013
RMB/€ (average)
9.80
8.81
8.16
/
/
retail sales growth: % change on previous year
RMB/US$ (average)
6.82
6.63
6.30
/
/
china
2009
2010
2011
2012F
2013F
Interest rates 3-month (%)
1.7
2.3
3.1
/
/
Retail Volume
15.54%
18.30%
17.05%
16.53%
17.56%
Interest rates 5-year (%)
3.6
4.6
5.5
/
/
Retail Value
1.59%
6.57%
6.47%
4.02%
7.23%
Note: *annual % growth rate unless otherwise indicated. E estimate F forecast Source: Statistics Bureau, Views Wire and Roubini Global Economics
Source: Oxford Economics Group
CUSHMAN & WAKEFIELD
Global Cities Retail guide
china Largest cities largest cities (2010) CITY
POPULATION
Beijing
20,186,000
Shanghai
23,474,600
Tianjin
13,545,800
Chongqing
29,190,000
Hangzhou
8,738,000
Xi’an
8,513,400
Wuhan
10,020,000
Harbin
9,933,000
Jinan
6,885,100
Chengdu
14,040,000
Guangzhou
12,700,000
Shenzhen
10,350,000
Shenyang
8,100,000
Dalian
6,690,000
Photo / sanfamedia.com CUSHMAN & WAKEFIELD
Global Cities Retail guide
china Retail Scene MAJOR FOOD RETAILERS ACTIVE IN CHINA
Data as of April 2012
Vanguard, Carrefour, Walmart, Trust Mart, Tesco, Ren Ren Le, RT-Mart.
MAJOR DOMESTIC NON-FOOD RETAILERS Gome Consumer Electronics, Suning Consumer Electronics, Brilliance, Dashang, Parkson, Metersbonwe, Septwolves
INTERNATIONAL RETAILERS IN CHINA (A SELECTION) Eland Group, Ikea, Bestseller, Inditex Group (Zara, Bershka, Pull & Bear etc), Mango, H&M, Basic House, Sephora, VF Corporation, Nike, Adidas, Apple
FOOD & BEVERAGE OPERATORS YUM! (KFC, Pizza Hut); Little Sheep; Costa Coffee, Starbucks, McDonalds, Burger King, AJisen Ramen, Kung Fu, Goubuli Baozi, Honeymoon Dessert, Quanjude Roast Duck, Dairy Queen, Subway
TYPICAL HOURS MONDAY - thursday
friday – SUNDAY
10:00 am – 10:00 pm
10:00 am – 10:30 pm
Applied to shopping malls during normal operation hours. There are some minor regional and seasonal variations in opening times.
Photo / maltman23 on Flickr CUSHMAN & WAKEFIELD
Global Cities Retail guide
china Retail Scene Prime retail stock, defined as shopping malls and department stores in selected city center submarkets, in 18 tier-1 and tier-2 cities, now totals 48 million square meters. While Beijing and Shanghai currently have around 4.1 million and 3.9 million sq.m of space respectively, many tier-2 have around two million square meters of prime retail stock. Almost all major cities have a very strong pipeline of supply and some cities will see a doubling of stock in just 2-3 years.
Data as of April 2012
Throughout China, developers are becoming more conscious of growingly sophisticated consumers along with the consumer experience they demand. As such many developers are designing their projects so as to deliver a leisure experience. Meanwhile, department stores are seeing something of a convergence with shopping centers, with operators including Sogo, Renhe Spring and Galeries Lafayette seeking to allow brands greater exposure for brand marketing, and incorporating comprehensive entertainment and F&B elements. As for e-commerce, according to Boston Consulting Group, with approximately 170 million online bargain consumers, United States is the world’s No.1 market. China however, is not far behind, with 145 million online shoppers. The Chinese government has heavily subsidized the rollout of high-speed access, thus internet penetration now approaches levels characteristic of developed countries. China could potentially become the world’s most valuable e-commerce market within just a few years. With challenging trading conditions in western economies, many luxury and “Fast Fashion” brands have focused significant attention on the Chinese market. Major luxury corporations such as PPR and LVMH reported strong sales growth in Asia, and notably in China. According to the WLA (World Luxury Association) China’s 2011 luxury goods sales growth is estimated at a white-hot 25%-30%, outstripping overall market growth. Fast fashion brands were also active with established brands such as Zara and H&M opening 20-30 stores each in 2011, while more recent market entrants such as Gap have laid out ambitious plans for expansion. Several new large-format fashion brands that are popular in Europe are now inspecting the China market, while highly anticipated new brands including A&F, Forever 21 and Disney Store are expected to open in the coming 12 months. With strong economic fundamentals, rising incomes across-the-board and a steadily growing base of brand-conscious consumers, retailers across the board are likely to accelerate their expansion in the Chinese market.
Photo / maltman23 on Flickr
new entrants to the market Gap
Hollister California
Abercrombie & Fitch
iROO
American Eagle Outfitters
Hysek
Moussy Forever 21
Azul by Moussy Tory Burch
CUSHMAN & WAKEFIELD
Global Cities Retail guide
china Key Features of Lease Structure KEY FEATURES OF LEASE STRUCTURE Lease Terms
2 to 3 years for most smaller tenants in shopping malls 5 years or longer for F&B tenants in shopping malls Up to 15 years for fashion anchors Up to 20 years for hypermarkets
Rental Payment
In street shop locations rents are typically base rent only, in department stores a percentage of sales only is payable, while in shopping malls the emerging standard is to pay the higher of base rent or a percentage of sales.
Rent Review
Basis of the rent review is open market rental value, and the frequency is negotiable.
Service Charges, Repairs and Insurance
Tenant is typically responsible for maintenance within their own premises. Landlord is responsible for maintenance of common areas and this is charged back through a management fee which is typically RMB 70-100 per sq.m per month for shopping malls in Shanghai and Beijing. An additional promotion fee may also be charged. Landlord is also responsible for the external and structural maintenance of the property. Tenant is often required to take out insurance for fire and 3rd party liability.
Property Taxes and other costs
Landlords bear all property related taxes such as Urban Real Estate Tax, business tax for rental income. Landlords and tenants normally share the stamp duty cost, which is minimal.
Disposal of a Lease
Assignment / Sub-letting is typically not allowed. And early termination is by negotiation only, however non performing tenants often negotiate early termination. About the Tenant’s Building Reinstatement Responsibilities at Lease End, typically is original condition, however many landlords willing to negotiate at the time of withdrawal.
Valuation Methods
Retail valuation methodologies are not very well established however international methodologies such as RICS are increasingly recognized.
Legislation
Guangzhou and Shanghai have standard leases but Beijing and most other Chinese cities do not. The standard leases can be adapted by means of supplementary clauses.
CUSHMAN & WAKEFIELD
Global Cities Retail guide
JOHN STRACHAN
MATT WINN
SANJAY VERMA
Global - EMEA Ph: +44 20 7152 5090 43-45 Portman Square London, England W1A 3BG
[email protected]
Americas Ph: +1 404-853-5309 55 Ivan Allen Jr. Boulevard, Suite 700 Atlanta, GA 30308
[email protected]
Asia Pacific Ph: +86 21-2320 0888 26/F The Headquarter Building 168 Xizang Zhong Lu Shanghai, China 200001 PRCi
[email protected]
www.cushmanwakefield.com
No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. © 2012 Cushman & Wakefield, Inc. All rights reserved. CUSHMAN & WAKEFIELD