According to the survey data of the China Real Estate Index System Shop Rental Index on the rental samples of stores in major commercial streets and typical shopping centers in key cities across the country, in the first half of 2020, the rental level of stores in China's major commercial streets and stores in key business districts (shopping centers) fell as a whole.

Under the influence of the new Crown pneumonia epidemic, residents' production and life are restricted, consumption activities are reduced, and the commercial real estate market is facing challenges; but on the other hand, the epidemic accelerates the change of consumption habits in the Internet era, and a new pattern in the commercial real estate industry will gradually take shape. Against this background, based on the analysis and summarization of past research experience and the current development of the commercial real estate industry, CIRCI carries out the research and compilation of the commercial real estate index of the China Real Estate Index System, which mainly covers the store rental index and the office rental index, to objectively reflect the price level of commercial real estate in key cities and their changing trends.

According to the survey data of the China Real Estate Index System's store rental index on store rental samples of major commercial streets and typical shopping centers in key cities across China, in the first half of 2020, the overall rental level of stores in China's major commercial streets and stores in key business districts (shopping centers) fell. Among them, the average rent of the stores in the 100 major commercial streets (100 Streets) constituted by the stores in the 100 commercial streets in key cities across the country as the sample subject was RMB25.1 per square meter per day, representing a drop of 2.41% from the previous period; and the average rent of the stores in the 100 major shopping malls (100 MALLs) constituted by the stores in the 100 typical shopping malls as the sample subject was RMB26.8 per square meter per day, representing a drop of 1.09% from the previous period.

During the epidemic, some landlords/operators launched a series of relief measures for tenants, such as rent-free period and rent deferral, etc. The data of the sample survey on store leasing showed that nearly half of the landlords in the sample commercial streets granted rent-free period to tenants, and more than 70% of the shopping centers in the sample shopping districts granted rent-free period to tenants (Note: the increase or decrease of the average rent of the stores did not take into account the impact on the rental level caused by the landlords/suppliers offering rent-free period to tenants during the epidemic). (Note: the impact of landlords/suppliers offering rent-free periods to tenants during the epidemic has not been taken into account in the average rental increase or decrease).

From the point of view of the number of increases and decreases, among the sample commercial streets, 12.1% of the commercial streets saw their rents increase, 83.3% saw their rents decrease, and 4.5% saw their rents remain unchanged from the previous period; among the sample commercial districts (shopping centers), 14.7% of the commercial districts saw their rents increase, 84.2% saw their rents decrease, and 1.1% saw their rents remain unchanged from the previous period. ) rents remained the same as the previous period.

From the perspective of market performance, from January to May 2020, China's total retail sales of consumer goods amounted to 13.9 trillion yuan, down 13.5% year-on-year, with the rate of decline narrowing by 2.7 percentage points compared with that of January-April; among them, the online retail sales of physical commodities increased by 11.5% year-on-year, with the rate of increase expanding by 2.9 percentage points compared with that of January-April; the share of online retail sales of physical commodities in total retail sales of consumer goods was 24.3%, compared with that of January-April. The proportion of online retail sales of physical commodities in total retail sales of consumer goods was 24.3%, expanding by 5.4 percentage points compared with the same period last year. Under the influence of the epidemic, online shopping has become an important way of consumption for residents, and the proportion of online retail sales of physical goods has continued to rise, with online consumption still exerting a squeezing effect on brick-and-mortar operations. Overall, the impact of the epidemic, China's economy and consumption has been a major impact on the commercial leasing demand recovery still need time.

1, 100 street store rental index changes

(1) 100 street store rental changes

According to the 15 key cities across the country, the main commercial street store sample survey data, by the key city of 100 commercial street store as a sample subject, constituting the 100 largest Commercial Street (Hundred Streets) store rental index. in the first half of 2020, the average rent of the stores in Hundred Streets was RMB25.1 per square meter per day, a drop of 2.41% compared with the same period of the previous year.

By city class, in the first half of 2020, 11.5% of commercial streets in first-tier cities saw a year-on-year increase in rent, 80.8% saw a year-on-year decrease in rent, and 7.7% saw the rent of commercial streets remain unchanged from the previous period. Among the first-tier cities, rents of 9 commercial streets in Beijing rose twice, fell five times and were flat twice, with Nanluoguxiang recording the biggest drop of 3.37%; rents of 11 commercial streets in Shanghai fell, with Tianzifang recording the biggest drop of 5.26%; rents of 3 commercial streets in Guangzhou rose once and fell twice, with Beijing Road Pedestrian Street registering a bigger drop of 3.67%; rents of 3 commercial streets in Shenzhen fell, with Dongmen Pedestrian Street recording the biggest drop, and East Gate Pedestrian Street recording the biggest drop of 3.67%; rents of 3 commercial streets in Shenzhen fell, with Dongmen Pedestrian Street accounting for 80.8% of the total. The rent of three commercial streets in Shenzhen all fell, of which Dongmen Pedestrian Street had the biggest drop of 5.59%.

In the first half of 2020, 12.5% of the commercial streets in second-tier cities saw year-on-year rental increases, 85.0% saw year-on-year rental declines, and 2.5% saw flat rents compared with the previous period. Among the second-tier cities, rents of major commercial streets in Nanjing rose on a year-on-year basis; rents of major commercial streets in Hangzhou, Changsha and Haikou rose or fell on a year-on-year basis; rents of major commercial streets in the remaining seven cities fell or remained flat on a year-on-year basis, with rents of Wuhan Optics Valley Pedestrian Street falling the most on a year-on-year basis, by 6.64%.

(2) Commercial streets with large rent increases and decreases

In the first half of 2020, among the sample commercial streets, the rents of eight commercial streets such as Nanjing Laomendong and Haikou Zhongshan Road rose sequentially, but the rate of increase was limited, of which Nanjing Laomendong had the largest sequential increase of 0.78%; the rents of Haikou Zhongshan Road and Haikou Jiefang West Road commercial streets rose by 0.5 percent sequentially. Haikou Zhongshan Road, Haikou Jiefang West Road commercial street rents rose between 0.5% (inclusive) and 0.7% (inclusive); Beijing Guijie, Hangzhou Wulin Road and other five commercial street rents rose within 0.5%. Among the commercial streets whose rents fell, 10 commercial streets, including Wuhan Optics Valley Pedestrian Street and Shenzhen East Gate Pedestrian Street, experienced relatively large year-on-year rental declines, with Wuhan Optics Valley Pedestrian Street experiencing the largest year-on-year rental decline of 6.64%; Shenzhen East Gate Pedestrian Street and Shanghai Tianzifang Commercial Street experienced year-on-year rental declines of 5.0%-6.0%; 7 commercial streets, including Chongqing Three Gorges Plaza, Suzhou Shilu Pedestrian Street and Tianjin Binjiang Road Commercial Street, experienced year-on-year rental declines of 6.64%. Chongqing Three Gorges Plaza, Suzhou Shilu Pedestrian Street, Tianjin Binjiang Road Commercial Street and seven other commercial streets saw rentals fall between 3.0% and 5.0% year-on-year.

2, 100 MALL store rental index changes

(1) 100 MALL store rental changes

Based on the sample survey data of typical shopping center stores in 15 key cities across the country, 100 typical shopping center stores in key cities as the sample subject, constituting the 100 largest shopping centers. In the first half of 2020, the average rent of stores in 100 Malls was RMB26.8 per square meter per day, down 1.09% year-on-year.

By city class, in the first half of 2020, 13.6% of the commercial areas (shopping centers) in the first-tier cities saw a year-on-year increase in rent, 84.1% saw a year-on-year decrease in rent, and 2.3% saw the same level of rent as in the previous period. Among the first-tier cities, the rents of 12 business districts in Beijing were up 10 down and flat, with Chongwenmen District experiencing the largest rental decline of 2.58%; the rents of 22 business districts in Shanghai were up 3 and down 19, with People's Square District experiencing the largest decline of 2.82%; the rents of 6 business districts in Guangzhou were up 2 and down 4, with Beijing Road District experiencing the largest decline of 3.99%; and the rents of 4 business districts in Shenzhen declined. In Shenzhen, the rent of four business districts fell from the same period in the whole, of which the Chinese strong business district and the central district of Futian business district fell by a large margin, both 2.29%.

In the first half of 2020, 15.7% of shopping centers in second-tier cities saw year-on-year rental increases, while 84.3% saw year-on-year rental declines. Changsha, Nanjing, Suzhou, Chongqing, Nanchang and other seven cities key business district rents all fell on a year-on-year basis; Chengdu, Hangzhou and other four cities key business district rents were both up and down on a year-on-year basis. Among the second-tier cities, the rent of Hangzhou Shenhua business district fell the most, by 3.70%.

(2) Rental increases and decreases in business districts

From the level of business districts, in the first half of 2020, among the business districts whose rents increased on a year-on-year basis, the rents of 10 business districts, such as Guangzhou Tianhe Road and Guangzhou Xiguan, increased at a higher rate on a year-on-year basis, of which the rents of the Tianhe Road business district of Guangzhou increased the most on a year-on-year basis by 0.61%; and the rents of the Xiguan district of Guangzhou also increased by 0.61% on a year-on-year basis. Guangzhou Xiguan business circle rent also reached 0.60%; Shanghai Chuansha, Shanghai Qibao 2 business circle rent ring increase in 0.5% -0.6%; Qingdao Fushan, Haikou Binhai Guomao, Shanghai Zhongshan Park and other 6 business circle rent ring increase in 0.5% or less. Among the business districts where rents fell, two business districts, Guangzhou Beijing Road and Guangzhou City Bridge, saw their rents fall by nearly 4.0%; three business districts, such as Hangzhou Shenhua and Nanchang Bayi, saw their rents fall by 3.0%-4.0%; and five business districts, such as Qingdao Licun, Shanghai People's Square, and Chongqing Three Gorges Plaza, saw their rents fall by 2.0%-3.0%.

3, rental operation trend research

From the market performance, since 2020, affected by the new crown pneumonia epidemic, online shopping has become an important way of residents' consumption, online retail sales of physical goods accounted for the proportion of the continued to increase, online consumption of the physical business operations of the offline entity to produce a certain impact. On the one hand, the epidemic has catalyzed the continued expansion of new business forms, pushing retail commercial enterprises to realize the accelerated integration of online and offline development. On the other hand, no-touch and self-service retailing provided by retail commercial enterprises were more favored by consumers, while the value of community commerce gained rapid improvement. Overall, in the first half of 2020, the economic operation has not yet returned to the normal level, and the major economic indicators such as investment and consumption have still not recovered to the level of the same period last year. In the short term, the domestic economy is still recovering, and physical business operations are still facing more challenges, with overall pressure on store rents. In the future, as the epidemic prevention and control situation improves, some of the previous suppressed consumer demand is expected to be gradually released, and support the steady development of the consumer market.

Supply, from the short-term supply point of view, affected by the epidemic, the number of newly opened shopping center projects in 15 key monitoring cities in January-May was only 14, with a total commercial floor area of about 820,000 square meters, mainly in Chengdu, Chongqing, Qingdao, Nanchang and other 8 cities, which is about 2.5 million square meters less than in January-May 2019. As the domestic epidemic prevention and control situation continued to improve, some shopping centers that suspended their opening plans due to the impact of the epidemic are expected to enter the market in the second half of 2020. In terms of long-term supply, from January to June 2020, the planned GFA of commercial land sold in 15 key monitoring cities was 25.095 million square meters, up 14.1% year-on-year. In terms of city ranking, the planned GFA of commercial land sold in first-tier cities rose by 100.3% year-on-year, while that of second-tier cities rose by 2.3% year-on-year. In terms of the proportion of transactions, the proportion of commercial land transactions in first-tier cities rose to 21.2% of the 15 cities from 12.1% in the same period last year, while the proportion in second-tier cities fell to 78.9% from 87.9% in the same period last year. Overall, the commercial land market in first-tier cities saw a significant year-on-year increase in the size of transactions, while second-tier cities saw more stable year-on-year transactions.

Demand, January-May 2020, affected by the epidemic, China's total retail sales of consumer goods fell 13.5% year-on-year, still not restored to the pre-epidemic level; while the cumulative year-on-year growth in online consumption continued to squeeze offline physical consumption, January-May online retail sales of physical goods increased 11.5% year-on-year, an increase of three consecutive months of expansion. By consumption type, catering revenue fell by 36.5% year-on-year; retail sales of commodities fell by 10.6% year-on-year. 15 categories of commodities in units above the quota, cereals, oil and foodstuffs, beverages, Chinese and western medicines, daily necessities and communication equipment increased by 13.4%, 8.5%, 4.9%, 2.5% and 2.3% year-on-year, while retail sales of the remaining 10 categories of commodities fell year-on-year; among them, gold, silver, and jewelry, clothing, shoes and bags, needlework and textile products increased by 11.5% year-on-year. Clothing, shoes and bags, needles and textiles fell by more than 20% year-on-year. Overall, under the influence of the new crown epidemic, China's consumer market has suffered a greater impact in the short term, although market dynamics rebound, but it will take time to restore the level before the epidemic, in the case of a slowdown in demand for leasing, store rents are still facing downward pressure in the short term.

Looking ahead, the prevention and control of the new crown pneumonia outbreak has entered a normalized prevention and control phase, but its impact on the economy will continue in the short term. Against the backdrop that the recovery of the domestic economy, the consumer market and the real business still needs time, the level of store rental may continue to go down in the short term. At the same time, the epidemic outside the country is spreading and spreading, and the impact on the world economy is still in the process of development and evolution; under the situation of greater uncertainty in external demand, the strategy of expanding domestic demand will continue to be promoted. And as the epidemic is gradually and effectively controlled, the resumption of business and the market is proceeding steadily, and with the support of policies to promote consumption, China's economy will gradually unleash the potential of domestic demand, and the momentum of consumption upgrading will also continue. As the vitality of the consumer market continues to recover, the physical business and commercial tenants are also expected to gradually return to normal levels; it is expected that in the future, China's key cities are expected to return to a stable trend of store rentals.

According to the China Real Estate Index System Office Rental Index on the national key cities in the main business district office rental samples of the survey data, in the first half of 2020, the national key cities in the main business district office rentals overall level of the cumulative total of 2.38%; which the average rent in the second quarter of 4.8 yuan / square meter - day, compared with the first quarter fell 1.54%. From the perspective of business districts, 10.0% of business districts saw office rents rise in the second quarter, 87.5% of business districts saw rents fall in the second quarter, and 2.5% of business districts saw rents remain unchanged from the previous period. Overall, the domestic economy gradually recovered in the second quarter of 2020, but the huge impact of the current epidemic outside the country on the world economy continued to develop and evolve, and external risks and challenges increased significantly. Against the backdrop of pressure on domestic economic recovery and increased uncertainty in the world economy, China's stable economic operation still faced more challenges, with consumption, investment and other major indicators lower than the level of the same period of the previous year; affected by the domestic macro-economy still in the downward range, demand for the office market in the major business districts of the country's key cities declined in the quarter, and rents continued to fall on a year-on-year basis. In terms of city grades, office rents in first- and second-tier cities all fell year-on-year.

1. Changes in office rents

From the perspective of city grades, office rents in both first- and second-tier cities fell YoY.

By city class, in the second quarter of 2020, 13.9% of the office rents in business districts in first-tier cities increased year-on-year, while 86.1% of the office rents in business districts decreased year-on-year. Specifically, among the 36 major business districts in first-tier cities, office rents in five business districts, including Beijing Lize Bridge and Beijing Science and Technology Park, rose YoY; office rents in 31 business districts, including Shenzhen Longgang Center City and Shenzhen Nanshan Central District, fell YoY.

In the second quarter of 2020, among the second-tier cities, 6.8% of the office rents in business districts rose, 88.6% of the office rents in business districts fell, and 4.5% of the office rents in business districts remained the same as in the previous period. among the 44 major business districts in 11 cities, office rents of the major business districts in Hangzhou, Nanjing, and Changsha were mixed on a quarter-on-quarter basis, while office rents of the major business districts of the rest of the cities fell or remained flat on a quarter-on-quarter basis. office rents in the major business districts of the remaining cities were either down or flat year-on-year.

2. Business districts with large rent increases and decreases

In the second quarter of 2020, the impact of the new Crown pneumonia epidemic on the office market continued to show, and among the 15 major business districts in key cities monitored by the Office Rent Index of the China Real Estate Index System, office rents of nearly 90% of the business districts fell on a year-on-year basis; among these districts, the rents of wholesale and retail, accommodation, food and beverage, transportation, sports and entertainment, etc. fell on a year-on-year basis. Among them, the wholesale and retail, accommodation and catering, transportation, sports and entertainment industries were more affected, and the office rents in the business districts where enterprises of these industries are more concentrated fell more than the previous year. Among the business districts where office rents fell sequentially, Longgang Center City in Shenzhen recorded the largest sequential decline of 3.96%, with rents falling to RMB3.7 per square meter per day; 13 business districts such as Nanshan Central District in Shenzhen and Shangdi in Beijing also recorded sequential declines of more than 3.0%; 47 business districts such as the Guangzhou Sports Center and Wujiaochang in Shanghai recorded sequential declines of between 1.0% and 3.0%; and 47 business districts such as Huaihai Zhong Road in Shanghai and Chunghai Middle Road in Chengdu also recorded sequential declines of more than 1.0% to 3.0%. Huaihai Zhong Road, Chengdu Chunxi Road and other 9 business districts office rent fell within 1.0%.

Despite the restriction of business activities during the epidemic, the Internet-related service industry, medical and big data industries continued to maintain an upward trend, based on the demand for expansion, the demand for office space in emerging business districts with better hardware and facilities, better property management and lower rents has increased. Meanwhile, TMT, finance and other industries remain the mainstay of office market demand, and some enterprises have expansion needs; therefore, office rents in business districts where enterprises of these industries are more concentrated remain relatively stable. Among the 15 major business districts in key cities monitored by the Office Rental Index of China Real Estate Index System, office rents in eight business districts, including Beijing Lize Bridge and Beijing Science and Technology Park, rose year-on-year, with increases of less than 1.0%.

3, rental operation trend research

From the market performance point of view, with the resumption of work and production solid advancement, the second quarter of the national economic operation shows recovery and improvement trend, but in 2020, January to May, investment, consumption, import and export and other major indicators year-on-year is still a downward trend, economic operation has not yet recovered to the level of the pre-epidemic situation, part of the industries are also facing new challenges to their stable recovery. Weak demand for office leasing in key cities and high vacancy rate, the combined factors resulted in office rents continuing to fall in the second quarter on a year-on-year basis. By industry, office demand related to the Internet and healthcare continued to grow against the trend, while office demand in the TMT industry and the financial industry remained stable, bringing some positive impact to the office leasing market.

On the supply side, in terms of new construction, from January to May 2020, the new construction area of office buildings in 15 key cities*** totaled 9.130 million square meters, a year-on-year decline of 24.6%. Among them, the new construction area of office buildings in first-tier cities increased by 6.7% year-on-year; in second-tier cities, it decreased by 39.5% year-on-year. In terms of land supply, from January to June 2020, the planned floor area of commercial office land sold in 15 key cities amounted to 25.095 million square meters, an increase of 14.1% year-on-year. Among them, the planned GFA of commercial office land sold in first-tier cities increased by 100.3% year-on-year; second-tier cities increased by 2.3% year-on-year. In the short term, the area of new office construction in 15 key cities nationwide declined year-on-year due to the impact of the epidemic; in the long term, the supply of commercial land in key cities will continue to grow steadily.

Demand, the second quarter of 2020, China's national economy as a whole is in the process of recovery. 2020 January to May, China's industrial value added above designated size fell 2.8% year-on-year, the service sector production index fell 7.7% year-on-year. From the perspective of major industries, in May, the production index of information transmission, software and information technology services, real estate industry, financial industry increased by 12.9%, 7.1%, 5.2% year-on-year, the growth rate accelerated by 7.7, 6.0, 0.8 percentage points compared with April; wholesale and retail trade, accommodation and catering industry decreased by 2.1%, 21.7% year-on-year, the rate of decline narrowed by 4.5 compared with April respectively, 12.0 percentage points. Overall, the TMT industry and the financial industry remain the mainstay of office market demand this quarter.

Looking ahead, in terms of the macro environment, in the second quarter of 2020, relevant policies to promote the resumption of work and production, and to support the prevention and control of epidemics were implemented in an orderly manner, and the economy continued to show a recovery trend. In terms of taxation, the state has introduced a number of preferential policies on taxes and fees to reduce the tax burden and cost pressure on enterprises and society. on May 15, the Ministry of Finance and the State Administration of Taxation (SAT) jointly issued the "Announcement on the Implementation Period of Tax Policies on Supporting Epidemic Prevention and Control and Guaranteeing Supplies and Other Tax Policies," to support the prevention and control of epidemics, the alleviation of enterprises' difficulties and the resumption of work and production. on May 19, the State Administration of Taxation (SAT) issued the "Announcement on the Matters Related to the Deferral of Income Tax for Small and Micro Profit Enterprises and Individual Businesses On May 19, the State Administration of Taxation issued the Announcement on Matters Relating to the Deferral of Income Tax Payment for 2020 for Small Micro-profit Enterprises and Individual Business Enterprises to alleviate the pressure on production and operation funds of small micro-profit enterprises and individual business households. In terms of credit support and financial services, the policy continues to give credit support to small and micro enterprises and individual business households. on May 25, the CBIRC, MIIT, NDRC and other six departments jointly issued the Circular on Further Regulating the Charges for Credit Financing and Reducing the Comprehensive Costs of Enterprise Financing, which puts forward 20 measures to further regulate the charges and management of various aspects of credit financing, reduce the comprehensive costs of enterprise financing, and better serve the high-quality development of the real economy. to better serve the high-quality development of the real economy. Since the outbreak of the epidemic, the CBRC has continued to optimize financial services in the field of epidemic prevention and control, and as of May 17, 2020, the credit support provided by banking institutions for the prevention and control of the epidemic and the resumption of work and production has exceeded 3.11 trillion yuan.

In the short term, under the influence of the epidemic, it will take time for China's economy to realize a full recovery. 2020 January to May, the three major demands of consumption, investment and exports are still down year-on-year; with the impact of the epidemic on the market gradually appeared, the short-term rental of office buildings will still be under pressure. However, in the long run, although China's current economic operation has not yet returned to the pre-epidemic level, but in the context of the epidemic prevention and control has achieved significant strategic results, with the resumption of work and production solid advancement, the gradual improvement of production demand, China's economic development and transformation and upgrading of the new kinetic energy will continue to develop and grow, all of which will promote the economy to return to normalcy in all aspects, and to support the smooth development of the office building market.

Reference: