Shanghai regional malls remain resilient post-pandemic
Domestic demand for storage in Hong Kong‘s metro area will continue to grow, given the rise of e-commerce and mini-storage.
The latest COVID-19 outbreak locally disrupted Shanghai’s retail business in 2Q22. With Shanghai gradually restoring production and returning to normal life since early June 2022, the performance of shopping malls diverged. After reviewing performances at over 130 shopping malls in Shanghai recently, we found regional malls are more resilient in the post-covid environment, in terms of foot traffic and occupancy. Our data shows that Shanghai regional mall occupancy rate remains at 94.6%, which is 7.3 ppts higher than the overall market.
Figure 1: Shanghai regional malls occupancy rate by submarket
Source: JLL Research, Sep 2022
We categorised different shopping malls in Shanghai into city-level, regional and community malls, according to their project size, coverage area, positioning, targeted customers and tenant types. According to JLL’s definition, regional malls are those in the non-prime area but have a large resident population within their coverage areas (usually within a 3-5km radius). They usually have project sizes between 50,000 and 100,000 sqm in GFA, offering a more balanced tenant mix and wider brand choices to provide daily necessities and services and meet customers' upgraded consumption demand.
Figure 2: Shopping mall definition
Source: JLL Research
The outperformance of regional malls is mainly attributed to the six reasons shown below.
Figure 3: Characteristics make regional mall resilient
Source: JLL Research
We chose four important reasons to explain in detail:
Customers prefer regional malls as their shopping destinations in the post-pandemic environment
As COVID-19 changed consumer expectations, customers' concerns for their health and safety made them less confident about visiting malls far from home. A survey data collected by Nielsen IQ and the China Chain Store & Franchise Association (CCFA) shows that regional shopping malls became more attractive in 2020-2021. Compared with the pre-pandemic period (2019-2020), the number of customers who chose regional malls as their shopping destination increased by 6%, while the number of customers who chose city-level shopping malls dropped by 22%.
Figure 4: Shopping malls most visited by customers (%)
Source: Nielsen IQ, CCFA; JLL Research
Regional malls offer balanced tenant-mix
Based on the tenant profiles of prime regional malls in Shanghai, fashion and F&B tenants account for about 25% of space each, while proportions of lifestyle, experience, services, and integrated operators, including supermarkets and department stores, evenly distribute the rest of 50% the space. Compared to city-level malls, dominated by fashion brands and community malls that tend to have F&B and supermarkets, regional malls have a more balanced tenant mix that can satisfy the various needs of regional customers.
Figure 5: Tenant mix comparison of different types of shopping malls
Source: JLL Research collected from prime shopping malls in Shanghai. Data as of Sep 2022.
Regional malls have a wide range of brands
Regional shopping malls have adapted to the consumption upgrade trend in recent years. Their upgraded brands widened the gap with community malls, providing residents with more choices. As a result, leading regional malls in decentralised areas attracted an increasingly larger number of first stores in Shanghai and even the first stores in China. According to DataQuest China, Hall of the Sun and Raffles City, the Bund introduced the largest number of first stores in 2021 in Shanghai.
Regional malls with distinctive designs and events attract cross-regional customers
Well-managed regional malls like to build special setups and hold distinctive events to suit their local cultures and environment. Their large retail space can also present special architectural designs, such as the giant Pikachu sculpture in Songjiang Incity and the life-size Freedom Gundam Statue in front of LaLaport Jinqiao.
Regional malls' strong attraction, resilience and sustainability may provide more possibilities for brands’ choices of store locations and be good examples for the upcoming retail projects positioning strategy in the post-epidemic era.