Chinese consumers are currently navigating more complex and challenging economic conditions than ever before. In response, individuals are actively seeking escapism, entertainment, and relaxation during their personal time. The market is swiftly adapting to this demand, reassessing developments, renovations, operations, and brand strategies. Savills has recently released its 2024 China Retail Trend report, providing insights into emerging trends and forecasts for the new year.

Trend 1: The comeback of leisure consumption
There was a robust recovery in tourism, film attendance, and the performing arts in 2023, indicating consumers' willingness to reconnect with entertainment experiences. Major cities, such as Shanghai and Wuhan, now allocate around 16% of total shopping mall space to leisure and entertainment areas.

Trend 2: Growth from niche categories
Consumers are increasingly expressing interest in emerging niche product categories, such as fishing and skiing products within the sports sector, perfumes in the cosmetic and skincare sectors, and instant cameras in the electronic products sector. These products experienced a more than twofold increase in their import values compared to 2019. Despite their relatively modest store sizes, these trends underscore the existence of undersupplied segments within the retail market, offering substantial potential for dynamic growth.

Trend 3: Value for money
Contrary to the notion that consumers might curtail spending due to an economic slowdown, they are increasingly engaging in comprehensive product research, leading to a reduction in the frequency and modes of purchasing. Consumers are actively seeking value for money, combining considerations of quality, taste, and utility. The essence of a brand and the substance of its products have become more crucial to consumers than the packaging and marketing of the product.

Trend 4: The Rise of Founder Brands
An entrepreneurial wave is sweeping through the retail market in China, driven by domestic startups aiming to fill niches vacated by larger brands, tap into unexplored consumer desires, and provide education. Founder-led brands contribute not only to market diversity but also underscore the significant potential of China's local brands in terms of quality, aesthetics, and trendsetting.

Trend 5: Mall Dynamics in Flux
Prime shopping malls remain attractive to mainstream brands, but retailers are increasingly exploring beyond traditional locations for stimulation. Prominent projects in non-core areas are addressing consumer demands for convenience and freshness. Meanwhile, the backstreets and side roads of city centres are gaining growing popularity among retailers.

Trend 6: Micro-vacation
The evolving travel landscape includes a rise in Bleisure (Business & Leisure), staycations, urban exploration, and spontaneous city wandering without a specific agenda. Tourists increasingly seek authentic local experiences, exploring both natural and historical landscapes while discovering unique shops and restaurants. In response, developers and landlords are targeting these micro-vacation groups, integrating retail and cultural tourism experiences to create a more relaxed and slow-paced leisure scene, offering novelties to cater to evolving preferences.

Trend 7: Revolutionizing Retail Spaces
Driven both by necessity and consumer demand, non-traditional formats are emerging. Many of these projects stem from urban rejuvenation initiatives, where physical constraints such as building preservation, plot size, and height restrictions contribute to unique architectural renderings, creating distinctive aesthetic spaces and unparalleled experiences.

Trend 8: Beyond Green
Global luxury brands are at the forefront of ESG progress in the retail industry. Luxury brands accounted for 66% of all LEED-certified retail spaces in 2023. Brands are considering more than just their physical retail footprint, thinking about sustainability across their entire supply chain.

Trend 9: Running towards Retail REITs
With the first four retail C-REITs approved at the end of 2023, retail assets are now officially incorporated into the REIT framework. Considering the nascent stage of the REIT market in China, the emphasis remains on stabilized, high-quality projects. Sponsors are likely to be renowned national developers with robust asset management capabilities, exposure to leading first- and second-tier cities, stable cash flow, and strong risk management proficiency.

Trend 10: Asset class forecast
11 key cities will receive 10.2 mn sqm of retail supply over the next two years. Significant supply and uncertain economic conditions will suppress rents in the near term, but a drastic decline is unlikely. In the future, projects will experience increased performance differentiation.