According to a research report released by Huachuang Securities, contrary to market perceptions that shopping centers are vulnerable to economic downturns and online consumption impacts, premium shopping centers within business districts exhibit remarkable stability. High-end luxury shopping centers have elevated entry barriers and extended operational cycles, yet remain susceptible to economic fluctuations. Currently, while luxury brand retail sales are declining domestically, the divergence among shopping centers has become particularly pronounced. Luxury brands are simultaneously closing underperforming stores in secondary malls while maintaining or even expanding flagship store spaces in key shopping centers to provide premium experiences for high-value customers. From a corporate perspective, exceptional commercial real estate companies must possess three essential elements: management excellence, strong stability of existing shopping center portfolio, and capability to ensure successful opening of new projects.

Why Can Premium Shopping Centers Maintain Stable Rental Growth?

Contrary to market beliefs that shopping centers are easily affected by economic downturns and online consumption impacts, leading shopping centers within business districts demonstrate exceptional stability. Although Beijing and Shanghai's social retail growth rates declined to approximately -3% in 2024, premium shopping centers in various business districts achieved positive retail sales growth, with Beijing Chaoyang Joy City, Shanghai Global Harbor, and Shanghai Wujiaochang Joy City recording year-over-year retail sales increases of 30%, 6%, and 26% respectively.

Shopping centers fundamentally serve as offline consumer traffic platforms, aggregating consumers and retailers to efficiently meet consumers' one-stop shopping and dining experience needs while providing merchants with effective customer flow reception points. Therefore, centers that maintain browsability can typically guarantee high foot traffic. Additionally, premium shopping centers within business districts exhibit Matthew effects, often becoming the preferred locations for popular brands, creating a positive "foot traffic-brand" cycle with high probability of sustained market leadership. Even facing economic downturns, leading shopping centers can achieve growth in foot traffic and retail sales by absorbing customer flow from underperforming competitors, introducing brands with growing demand, and leveraging scale advantages in marketing and membership activities. Furthermore, rental fluctuations remain smaller compared to retail sales variations.

How Can Current High-End Luxury Shopping Centers Maintain Stability or Achieve Growth?

High-end luxury shopping centers located in cities with relatively stable competitive landscapes and possessing alpha characteristics are expected to maintain growth in both retail sales and rental income. While luxury shopping centers have high entry barriers and long operational cycles, they remain vulnerable to economic volatility. Currently, as luxury brand retail sales decline domestically, divergence among shopping centers has become particularly evident. Luxury brands are closing low-efficiency stores in secondary malls while retaining or expanding store spaces in key shopping centers to provide luxury experiences for high-value customers.

Therefore, leading players in cities with stable competitive environments can maintain stable retail sales or achieve growth through several approaches: introducing rapidly growing brands such as Luk Fook Jewellery, Arc'teryx, On Running, and Miu Miu; absorbing customer flow from closing shopping centers within business districts; upgrading and enhancing offerings; and expanding with additional retail spaces. Specific examples include Beijing Sanlitun Taikoo Li and Shenyang MixC.

Why Is Browsability, Rather Than Single Factors Like Location or Operational Capability, the Competitive Barrier for Individual Shopping Centers?

Shopping centers may gain strong first-mover advantages by occupying prime locations early, but prime locations within a city or business district are not unique. If larger competitors with stronger operational capabilities emerge, previously advantaged projects may face elimination risks. Additionally, shopping centers can often strengthen their district positioning advantages through strong operations, as seen in Nanjing West Road business district, where Hang Lung Plaza, HKRI Taikoo Hui, and Kerry Center have maintained Shanghai's premier luxury retail position.

Therefore, for long-term success, individual shopping centers must achieve comprehensive excellence across location, positioning, scale, circulation flow, and operations without significant weaknesses, maintaining browsability.

Why Is Core Competitiveness of Commercial Real Estate Companies Centered on Establishing Comprehensive Management Systems?

Creating and operating shopping centers represents典型 know-how business with certain barriers, though experience is not scarce. Investment capital and talent acquisition can build quality shopping centers. The genuine differentiation among commercial real estate companies lies in their ability to consistently manage multiple shopping centers successfully, making comprehensive management systems that ensure employees' proactive application of experience the core competency.

For commercial real estate companies, effective management systems primarily include talent pipeline development mechanisms, incentive structures, and balanced centralization and decentralization approaches.

Premium Shopping Centers and Commercial Real Estate Companies Represent典型 Dividend Assets with Stability During Consumption Downturns

Even facing economic downturns, leading shopping centers within business districts maintain strong stability by absorbing customer flow from exiting secondary players, introducing growth-demand brands, and leveraging scale advantages in marketing and membership activities to ensure foot traffic and retail sales growth.

From a corporate perspective, exceptional commercial real estate companies require three essential elements: management advantages, strong existing shopping center stability, and capability to ensure successful new project openings.

Investment recommendations include companies possessing these three elements: SWIREPROPERTIES (01972), SEAZEN (01030, 01030), and CHINA RES MIXC (01209). The report suggests attention to HYSAN DEV (00014) for dividend yield advantages, WHARF REIC (01997) for stable operations, and leading business district REITs with strong operational capabilities.

Risk Warning: Potential beyond-expected decline in economic and consumer spending, intensified industry competition.