THE booming retail market in the last quarter in Shanghai has created space problems for new retailers as they struggle to rent suitable areas and existing brands which are seeking expansion.
The difficulties in finding suitable stores in well-known retail malls in downtown areas have prompted retailers, especially the international brands, to switch strategy as they compete in an increasingly competitive market.
Some new international retailers have decided to shelve their expansion plans due to the lack of a suitable prime location presently.
But existing well-known brands are actively expanding their presence despite the tight supply of prime retail space.
Famous luxury brands such as Prada, Louis Vuitton and Chanel have all committed to lease space in the Peninsula Hotel on the Bund as the area continues to develop as a fashion destination, while others are seriously considering self-owned and operated stores rather than being represented through an authorized dealer. Successful examples include Cartier and Dunhill and some watch brands, which are operated by Hengdeli, are also exploring this option.
Another avenue is to go further afield to shopping malls in suburban areas.
Rolex, Cerutti 1881 and some other brands have done just that, opening outlets in the Friendship Shopping Center in Xinzhuang in Minhang District.
Indeed it is the first time for most of these high-end brands to open stores outside the core shopping districts in Shanghai, indicating their strong confidence in the local retail market.
The latest quarterly research conducted by leading real estate services provider DTZ has pointed out that the Xinzhuang area in Minhang, which took shape in the 1990s and has benefited from the city's Metro Line 1 service, is now a mature residential and retail community with a large population of white-collar staff working in downtown.
When the Zhongsheng Shopping Center and Cloud Nine Shopping Center are opened, the total gross floor area of middle-to-high-end retail shopping areas in Xinzhuang is expected to surge to nearly 400,000 square meters, even exceeding that of Xujiahui, according to industry watchers.
Meanwhile, from the landlords' perspective, new properties have been added and upgrading of some existing complexes continues around the city.
Some of the new properties downtown include Plaza 353 on Nanjing Road E. in Huangpu District and InPoint on Wujiang Road in Jing'an District, with a predominance of fashion and food and beverage outlets.
Existing properties, including Hong Kong Plaza and Westgate Mall, are undergoing renovations. Changshou Commercial Plaza, whose 90-percent stake was recently acquired by Blackstone, is scheduled to complete full-scale restoration in August and begin leasing.
Some landlords of malls, whose upgrading has been completed, have become more fussy about the type of tenants they want, industry observers said.
For instance, a clothing retailer was turned away by several malls across the city before it finally secured space in the Plaza 353 mall, and Pacific Department Store, a middle-to-high-end shopping center in Xujiahui, has changed about 30 percent of its tenants after it reopened in June following a three-month renovation.