By Sam Crispin, Head of China Research, FPDSavills

The size of Shanghai's catchment area amounts to the whole of China. Apart from being one of the largest cities in the world, the city also lies at the hub of the surrounding provinces of Jiangsu, Anhui and Zhejiang with a combined population of over 174 million and the city attracts around 70 million visitors from China and overseas each year.

Shanghai is now almost unrecognisable from 5 years ago. Apart from massive real estate development, new infrastructure is reshaping the retail environment. Metro lines, pedestrianisation schemes to the future clean up of Suzhou Creek are making new areas viable as retail locations and diminishing others. The existing prime retail areas will always remain along Nanjing Road, Huaihai Road, Sichuan Road and in Xujiahui. These areas all have major department stores targeting a range of income earners with a limited number of shopping centres attracting high-income earners. But the top end stores are ahead of the market and are usually the best places to find a bit of peace and quiet in a city where noise seems to permeate every corner.

Supply of Grade 'A' retail space fell in 1998 to just under 300,000 sq.m. compared with around 400,000 sq.m. in 1997 and a forecast of nearly 400,000 sq.m. of new space for 1999. Rents in new retail centres range from US$39 per sq.m. per month to US$90 per sq.m. per month in The Grand Gateway in Xujiahui which promises to be one of the most exciting retail concepts in China and is scheduled for completion in late 1999.

There is potential for Shanghai to absorb this space in the longer-term as per capita retail space is a little over half that of Hong Kong. The problem is that the new space is being completed faster than it can currently be absorbed and this years crop of new malls are looking hard to fill. A number of secondary retail areas are emerging and these range from the obvious Jing'an Temple and Gubei to the less obvious Wujiaochang and Dabaishu in the north-east of the city. These areas deserve to be watched closely as rising incomes filter down to those living in the densely populated districts of Hongkou and Yangpu.

The challenges faced by overseas retailers don't get any less as time goes by. Recent enforcement of regulations mean that only 9 out of 72 foreign invested retailers with municipal government approval meet the more stringent requirements for central government approval. The result is an enforced restructuring and consolidation of operations.

A walk along any of Shanghai's major roads reveals one of the major pastimes of Shanghainese; eating. People are buying, selling or eating food at almost every step of the way and foreign invested fast food chains appear hugely successful in the city with the largest number of hungry mouths to feed in China. Satisfying much of Shanghai's voracious appetite is KFC who had 51 outlets in Shanghai by the end of 1998. Of local brands Zhending Chicken and Yonghe Soya Milk have been opening aggressively during 1998 and these are aimed at the more traditional Chinese tastes.

The cosmopolitan side of Shanghai is best reflected in the range of restaurants and bars in the city. Almost every continent is represented by a themed bar or restaurant and the imagination of Shanghai's Chinese and foreign restauranters and bar keeps knows no bounds. M on the Bund is just the latest of these and it can now only be a matter of time before the range is complete with an Antarctic Pleasure Palace of some kind complete with Penguin Steaks and Whale Blubber Hotpot on the menu; remember where you read about it first…

_____________________________________________________ To talk to someone who understands your real estate needs in China call FPDSavills in Shanghai on 6474 8908 or for further information e-mail Sam Crispin on scrispin@fpdsavills-sh.com