Retailers in China are optimistic given the nation's strong economic development and rapidly growing middle-class consumer group but quality retail space is in short supply, according to a recent survey.

 

International real estate services firm Jones Lang LaSalle surveyed 92 domestic and foreign retail chains at the end of last year on retailer sentiment in China.

 

Most respondents were confident about trading prospects in China this year, with 82 percent expecting gross turnover to increase and 97 percent believing profit margins would remain the same or improve over the next 12 months.

 

These expectations were based on the fact that China's gross domestic product averaged 8.9 percent annually over the last seven years and has continued to be outpaced by retail sales growing at an annual rate of 10 percent.

 

The prosperity of China's tourism industry and demand for different types of retail real estate products also contributed to retailers' optimism.

 

The survey showed that 97 percent of retailers in China expected to expand their networks this year. None expected a decline in the total number of stores.

 

Of those surveyed, 37 percent said they would expand rapidly, 43 percent were aiming for moderate growth, while 17 percent planned marginal growth.

 

"The strong and positive results recorded for retailers in our survey reflect the aggressive expansion and modernization of the retail sector in China," said David Hand, head of China Retail for Jones Lang LaSalle.

 

"The market will become ever more complicated and competitive."

 

But 89 percent of respondents said locating suitable sites for retail outlets would be difficult, mainly due to lack of quality space and rising rental costs.

 

Landlords that provide genuine shopping center management that focuses on the "shopper experience" and "partner with retailers" will outperform those that provide more traditional property management services, according to Hand.

 

"Another area for gains would be to differentiate product mix by locations," said Hand, explaining that retail space in suburban and family-oriented areas was becoming more distinct from those located in city centers.

 

Retailers could improve product placement that varied between these formats and target markets, according to the survey.

 

It also said that rule changes due to China's WTO (World Trade Organization) commitments meant that foreign retailers' existing joint ventures or those entering China without joint venture partners might lose or risk strategic relationships with agents and developers.

 

"Fostering relationships with key developers and making use of quality retail leasing agents may be a way to gain access to multiple sites or projects and can also make the hunt for new store space easier and more predictable," said Hand.

 

(China Daily January 12, 2007)