Revealing Shanghai Nanjing Road: Riddle Of Rents Rising

What made Shanghai Nanjing West Road's white-collar workers last month to have lunch in 7-11 convenience stores? What made some clothing and supermarket chains slow down?

The answer is rising.

Rent.

The rise of rents is eating away the profits of the catering industry. In order to keep on operating, they have to follow the rent to raise the price, so that the white-collar workers in Nanjing West Road will be pushed back. For clothing retailers and supermarket chain retailers, they must also face the competition and fight for the price of the hand, so the price increase can not get through, so they can only slow down the pace of expansion.

Reporter survey shows that in addition to affecting the normal supply and demand factors of rental prices, due to the speculative buying of shops and office buildings in the property market, there may be a more critical impact on the rise of rent in the first tier cities.

Rent cost for lunch

Miss Lee, one of the 7-11 convenience stores near the Nanjing West Road subway entrance in Shanghai, has a queue of fast food buyers at noon every day. Miss Li, who works for an international management consultancy company nearby, is one of them. At 1 p.m. on May 24th, Miss Li started her lunch at a chair with no back on the edge of the convenience store window.

Because cheap, when Miss Li meal alone, often will choose this 7-11 convenience store, this has the chicken leg, the tomato scrambled egg and the rice lunch, "generally two or three dishes more than 10 yuan, the most expensive also 20 multivariate."

By contrast, even nearby popular restaurants, the same standard will cost forty or fifty yuan per person. Although the monthly income after tax is over 10000 yuan, Miss Li still thinks the figure is somewhat expensive.

In December last year, a survey of white collar workers in Nanjing West Road, a Shanghai media, showed that nearly 80% of white-collar workers thought the price of lunch was high, and eating hard and expensive was their biggest headache. Only 8.5% of the respondents could accept lunch of more than 30 yuan.

The four floor of a building near miss lee's company is a centralized restaurant.

"Before that there was a restaurant, the average per capita was forty or fifty, but we felt that things were not worth it at all and felt expensive.

But we also probably know that their cost is too low, and the rent is too expensive.

Miss Li said.

Even so, the restaurants have long been closed, leaving only empty stalls.

The reporter inquired the owner's offer in the capacity of the tenant. The answer was 15 yuan per square meter per day, and the rent of the booth was 200 square meters, which was 3000 yuan per day.

Suppose that 50 yuan per person meal, if the rental of the above area shops, in the elimination of raw materials, labor costs, it means that every day 60 people's business income to pay rent.

According to our earlier reports, the cost of rentals in Shanghai's catering industry accounts for about 15% of the total revenue. This also means that if we want to maintain normal operation in the above shops, we should have a daily income of 20 thousand yuan, so the number of people serving meals per day should be at least 400.

Compared to the current rent cost of 15%, the proportion was 8% to 10% before 2006.

Jin Peihua, Deputy Secretary General of Shanghai catering industry association, revealed that at present, the gross profit margin of the catering industry is 55% to 60%, the labor cost is about 20%, the water and electricity coal is about 6%, the tax revenue is about 5%, the depreciation fee is 7%~8%, the miscellaneous fee is about 3%~4%, plus the 13%~15% of the house lease, which reaches 54%~58%, and the whole industry is almost at the critical point of profit and loss.

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Smith Barney

(002269, stock bar)

7-11 the convenience stores will come out to the left, and it's the sun building that is more concerned about the withdrawal of Nike.

A bulletin on the floor of the floor of the first floor showed that Nike had withdrawn from there soon, and most of the industry thought it was rent pressure to leave Nike.

"Surely it is not because the rent can not be withdrawn."

Huang Xiangyan, director of communications in Greater China, Nike sports (China) Co., said to our reporter.

On the occasion of the closing of Xiangyang Building store, a media official announcement released by Nike said: Shengyang (Shanghai) Trading Co., Ltd. has terminated the lease agreement with shops in Nanjing West Road Nike Shanghai 993, which is leased by Shengyang company and Subleasing with Nike.

Due to the adjustment of Shengyang company's operation strategy, its management team decided to terminate the lease agreement for the entire 993 building in Nanjing West Road ahead of time with the owners.

"Recently, the company is talking about the rise of China's cost, but rent has not become a particularly stressed cost pressure."

Huang Xiangyan said.

However, for domestic brands, the cost of leasing is rising rapidly.

Yin Xufei, a real estate researcher at CIC, points out that for retail businesses, rental costs generally account for about 17% of the cost, but in the past 3 years, rental costs have risen faster, and their operating costs are also increasing.

Xue Jianxiong, an analyst with Yi Ju, told reporters that the cost of renting now accounts for about 25% of the cost.

002269.SZ, the United States of America, Shanghai (Limited by Share Ltd), has said to the media: "the rent of quality shops in some cities, especially in the first tier cities, has increased by more than 30% annually, which will seriously affect the profitability of casual wear enterprises."

In April this year, Smith Barney closed its Me&City flagship store in Huaihailu Road.

American state clothing staff, who do not want to be named, said they were closing stores because of losses.

Another media said that in the past two years, the United States and costumes are in the early stage of the rental store, and the rent will be greatly improved, even facing the situation that it can not be renewed.

In the industry, it has been louder to promote the big store mode, and now it is quietly changing.

In its annual report of 2011, the United States said that this year the company's new direct outlets are mostly small and medium sized shops and counters. New rental expenses are relatively small, and new manpower costs are controllable. Therefore, the growth of sales costs has been well controlled.

However, according to the analysis recently released by the media, Qomi securities has been cautious in the 2012 annual exhibition program, and the growth rate of the shop has decreased from 30% in 2011 to 5% to 10%. The focus of the operation will be shifted from store expansion to the flat effect of the store (sales per square metre per month).

By 2012, 1Q (first quarter), the United States and the United States directly operated battalion to 22 thousand, and joined the Ping effect 18 thousand, compared with ZARA, UNIQLO and other international brands, the efficiency of 50 thousand is still a big gap.

From the annual report of the American Apparel, the operating income in 2011 increased by 32.59% compared to 2010. If the rent growth rate is 30%, it will undoubtedly have an immeasurable impact on its operation.

For the impact of rents on their own operations, Smith Barney's simple response to our reporter said: "the company has been more troubled recently, with regard to rent pressure, inventory, investment real estate and so on, will be formally fully responded to at a recent time."

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Rents rose rapidly.

About two or three blocks west of Xiangyang Building, the conspicuous Kerry Center business building.

Yang Yuechen, director of the international property consultancy, Shanghai research and consulting department, said: "the two phase of the Kerry Center, the latest Nanjing Road, has reached a price of 60~80 yuan / m2 per day. The office price is 16~18 yuan / m2.

On the whole, Nanjing West Road is a more expensive commercial block in the country. "

Lai Fang's monthly data on the first floor of China's high-end shopping malls in the first half of 2011 showed that the high-end shopping malls in Shanghai were rentals high, ranking the first in seven cities of Shanghai, Beijing, Guangzhou, Shenzhen, Tianjin, Hangzhou and Chengdu, and the monthly rent of RMB per square meter was around 1500 yuan.

In Laifang's monitoring rate of return on global high quality retail property, Shanghai has the highest return rate of nearly 7% of the nine cities in the world including Hongkong, London, Tokyo, Paris, Frankfurt, Singapore, Madrid, Sydney and Shanghai.

The absolute level of office rent is also directly following the global "expensive" level.

According to Laifang: until 2011, Beijing was the most expensive office market in China at the rate of $56.05 per square foot per year. Shanghai was followed by $49.16 per square foot per year, and the two cities ranked nineteenth and 28 in the world's most expensive office cities.

According to our reporter, whether Beijing, Shanghai, Guangzhou, Shenzhen, or other two or three tier cities, rents began as early as 2007, has entered a significant growth channel.

In the 2012 global mansion and wealth outlook report released by Lai Fang, selected London (West), London (Financial City), Paris, Singapore, Shanghai, Hongkong and Moscow as samples. In the first quarter of 2007 to the first quarter of 2011, office rents changed year by year, and Shanghai changed by an average of 17% a year, ranking below the first Hongkong, and the rest cities or regions had an annual fluctuation of 10%.

"China's shops market has also been hot, from 2008 to 2009, several quarters were also affected by the international crisis, but slowed down faster than the office market.

Like the rental of shops in Shanghai, these years have remained at an annual 10%~15% growth rate.

Yang Yuechen introduced.

Weidong, director and assistant director of the research department of northern China, said: "according to the data we have traced, the annual rental growth of China's shops is about 10% in 2009.

However, some enterprises mentioned that the annual rent of the first tier city shops is 30%, which is possible in some prosperous neighborhoods of the first tier cities.

However, Xue Jianxiong believes that the growth of 30% should be a case, especially those shops that suddenly change new tenants.

Speculation in shops

Even so, the media used the "skyrocketing" to describe the recent growth in the rent of Beijing business district.

"Yes, skyrocketing."

Wei Dong said.

Dead Leung Ban's data show that in the first quarter of 2012, Beijing office rents rose by 47.76% compared to the same period last year, and the highest rent for office buildings in the world. In the same period, the rent increase of office buildings in Shanghai was 18.5%, Guangzhou 19% and Shenzhen 16%.

In the first quarter of 2011, Beijing office rents increased by 25% compared with the same period last year. The difference between Shanghai and Guangzhou and Shenzhen was not very large this year.

"There are several reasons for the soaring rent in Beijing: first, the international pnational enterprises are resurgence of Beijing office; secondly, Beijing has not increased new supply of office buildings in recent years.

The increase in Shanghai office was also relatively high, because the new supply has been slowed down last year.

Wei Dong said.

Third equally important reasons are more and more funds coming into the shops and office buildings.

Dead Leung Ban and Lai Fang reported in recent years: "because of the restriction, more and more investors are turning to shops and offices."

On the glass curtain walls of some high-rise and scaffolding business buildings in Shanghai, you can often see the words "unlimited purchase or unlimited loan".

"Over the past few years, the market of office stores has begun to take shape, and many of them have been bought and sold.

Most of the new buyers are very rich, although the prices of office buildings are very high, but most of them are paid at a lump sum. It seems that these buyers are not short of money.

Wei Dong said.

From a large number of new landlords' actions, Wei Dong feels that the private capital is still highly mobile.

Some speculative features began to appear in the shops and office buildings.

Wei Dong introduced that in China's first tier cities, the vacancy rate of office buildings is relatively low. At present, some two or three line cities appear to have high vacancy rates.

However, no matter whether the vacancy rate is high or low, the rent is not easy to fall, and the space for the tenant to bargain is very small.

"This situation is rarely seen in the mature countries of international real estate development. Some international customers will wonder why high vacancy and rents do not decrease, which is not in line with the laws of the market."

Wei Dong said.

"China's housing market has been hot for more than 10 years, and confidence in land and property values has also spread in the market of offices and shops. Buyers are very optimistic about the future appreciation.

For the rent, they will even have a mind that does not care, because the appreciation of the property itself is not so important as the appreciation of the property itself, so most of them will be willing to vacant or not to rent.

Wei Dong said.

In the neighborhood near Nanjing West Road subway, there are more and more private houses on the first floor to join the ranks of "shops".

There are small restaurants, coffee shops, clothing shops and so on.

One of the houses was dozens of square meters, with a small noodle shop, and half of the dining chairs were outside the door.

At lunch time every day, there will be a group of white-collar workers queuing up for dinner in the big sun.

This small noodle shop is the biggest secret of business, and its price will be clear: noodle soup, 4 yuan / bowl, big row, 6 yuan / block, three silk, 3 yuan / share...

"Wages and interest rates do not depend on the products of labor and capital, but depend on the amount of rent left behind in the products."

Economist Henry George wrote in progress and poverty.

High rents are eroding the real wage and welfare growth of migrant workers and eroding China's manufacturing industry, which is already very feeble.

China's manufacturing industry is getting more and more upset.

Since 2007, the overall environmental fluctuation of the international economy has been abnormal rather than prosperous. Why does the rental of China's shops and offices instead become a fast growing channel?

Yang Yuechen believes that China's economy is relatively small under the influence of the international economic crisis.

In 2008, the Chinese office market was affected by the international environment, but the growth rate slowed down for a while. But in 2010, it began to restore a strong upward trend.

Moreover, the demand for Grade A offices in domestic enterprises has begun to increase, especially in banking and finance, in which banks even buy whole buildings.

China's commercial market is even less affected by the international economic crisis than the office market.

Although China's economy is less affected by the international economic crisis, China's domestic problems began to emerge from the second half of 2010.

The latest purchasing managers' index (PMI) of the National Bureau of statistics dropped from 53.3 in April to 50.4 in May, the lowest in 5 months.

Although this is the 50 consecutive month that PMI has been maintained for sixth months, indicating that manufacturing activity is expanding, the decline in the index clearly releases a clear signal that growth is slowing down.

The annual report shows that its gross profit in 2011 is 44%, which is the lowest gross profit margin after the listing.

Another brand of PEAK, a domestic leisure and sporting goods company, announced in May 4th that the same store sales volume (at retail prices) of some retail outlets in the group ended in the first quarter of March 31, 2012, unchanged from the same period in 2011.

In March 31, 2012, the number of authorized retail outlets in China reached 7523, which was 283 less than that at the end of 2011. According to our group's retail network optimization plan, the number of authorized retail outlets is expected to be around 7000 at the end of 2012.

In the past, PEAK's authorized business was in the trend of rapid growth every year. Compared to 2010, PEAK added 582 new stores in 2011.

The days of China's manufacturing industry are becoming more and more sad. Wang Yuqing, head of the taxation teaching and research group of Shanghai Jiaotong University Overseas Education Institute, told our reporter that most of the net manufacturing profits in the manufacturing industry it traced was only 3% to 4%, and it would not exceed 10% at most.

"More and more manufacturing industries are turning to channels and platforms.

But everyone knows, there is no product, what to sell?