In the second quarter of 2009, while most consumers in developed economies were tightening their belts, China's retail sales market was among the most resilient in the world. The Mainland government's RMB4-trillion stimulus package as well as the ‘household appliances and automobiles to the countryside' scheme greatly supported the country's retail market.

Though some international brands slowed their expansion plans, the foray of international fast food chains in China continued unabated. Pizza Hut opened 98 restaurants on the Mainland in the first quarter, boosting its presence to 3,103. Meanwhile, KFC opened over 200 branches in the first half of the year and McDonald's announced plans to open 150 outlets in 2009.

Retail rents in China's major cities dropped in the second quarter, due to an abundant supply of retail space and local retailers' cautious stance towards opening outlets. By the start of next year, more retailers may expand their operations once the country's export sector has shown signs of recovery and the economic recovery is more firmly established. However, a large amount of new retail space is expected to come on stream in China's major cities and the market will likely stay in a consolidation mode with rents softening.

Shanghai

Shanghai's retail market showed signs of stabilising in the second quarter, as consumer sentiment improved. Most shopping centres in the city achieved satisfactory sales from promotional drives. A lucky draw launched in Xujiahui between 24th April and 10th May boosted the retail sales of major shopping centres in the area to approximately RMB160 million, up 32.0% compared with the same period last year. During the Dragon Boat Festival, New World City in Nanjing Road recorded a sales turnover of RMB102 million, up fivefold compared with the previous year.

Due to a recovery in retail sales, the decline in the average rent of prime retail properties narrowed to just 0.6% in the second quarter, from 4.7% in the first quarter. Rents in some best-performing retail centres in Shanghai, such as Raffles City and Grand Gateway, stayed firm in the second quarter, ranging from RMB50 to 60 per sq m per day on the first floors. With investment sentiment also picking up, the decline in the average capital value of prime retail properties narrowed to 0.7% in the second quarter, compared with 15.2% in the first quarter.

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