Retail vacancy in Guangzhou shrinks despite rising market sentiments

F&B businesses enjoyed a rapid recovery in Q3.

The leasing demand for the retail property market in Guangzhou, China is projected to rise, bringing down the average vacancy rates despite rising confidence in business expansion in the city, according to a report from Savills.

The local consumption market is expected to continue with its expansion, supported by the growing population and local residents’ improving consumption power. This is expected to boost retailers’ market sentiment and enhance their confidence on business expansion in Guangzhou.

“With that being said, leasing demand for the Guangzhou retail property market is forecast to increase, and the citywide average vacancy rate is expected to decrease. Considering two new shopping centres in the secondary prime areas are scheduled for completion in [the fourth quarter of] 2021, the citywide average rent is anticipated to structurally decrease,” the report stated.

The two new shopping centres, including ICC Mall in Tianhe Road and Phase II of the M. Live in International Financial Town, brought 164,775 sqm of retail space to the market. By the end of the third quarter (Q3), the citywide total retail stock rose to about 6.7 million sqm.

The local consumption market experienced a rapid recovery from a small COVID-19 outbreak in June, with citywide monthly retail sales year-on-year (YoY) growth rate reversing from a 1.4% decline in June to a positive 4.3% in July.

During the same period, the food and beverage (F&B) and accommodation sector outperformed others as its monthly YoY growth rate of retail sales rebounded to 1.0% from a massive 24.5% drop, according to the Guangzhou Statistics Bureau.

These all supported a relatively positive market sentiment for Guangzhou’s retail leasing market, and retailers from the F&B sector were active during the quarter. The citywide average vacancy rate edged down 0.1 ppt quarter-on-quarter (QoQ) to 12.9% by the end of Q3 2021.

“As mentioned above, F&B brands continued to search for new opportunities for business expansions and a series of leasing transactions, such as M Stand and Wagas in OneLine Walk, machi machi in K11 and Xie Xie Pot in Teemall, were recorded in Q3,” Savills said.

The average rent for most of the shopping centres remained unchanged, whilst that of several projects decreased due to their ongoing brand-mix adjustment activities. As a result, the citywide average rent edged down 0.4% QoQ on an index basis.