Wuhan’s Post-pandemic Surge to Central China’s Most Important Retail Hub

WUHAN — Wuhan’s post-pandemic retail scene is heading for a revamp as commercial real estate developers rush to build new shopping malls in the city.

According to Savills Research, new retail property is expected to exceed 1 million square meters in the megacity this year, the largest since 2008.

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Before it was known as the epicenter of the Coronavirus Pandemic, Wuhan was more famous for its status as the “Chicago of China.” A transportation hub by the Yangtze River, Wuhan is known for its annual cherry blossom festival and unique “guozao” breakfast culture scene.

The city not only boosts a robust industrial foundation, but in recent years, Wuhan has become the home to the “second headquarters” for local tech giants such as Xiaomi and leading AI and speech recognition firm Iflytek.

Wuhan’s spending power is not to be overlooked. With a population of 13.64 million, about half that of Shanghai, Wuhan is the country’s ninth largest metropolis and the capital city of Hubei Province.

In the first half of 2022, Hubei Province’s total retail sales grew 3.9 percent to 986.617 billion renminbi, or $142.6 billion, the second-fastest Province in the country.

Marked by local media outlet Yi Magazine as a “new tier-1 city,” the Wuhan government aims to build an “international shopping Center” with total retail sales of consumer goods exceeding 1 trillion renminbi, or $144 billion, by 2025.

“The consumption power of Wuhan is relatively high in the Central China area,” said Billy Ip, general manager at Heartland 66 shopping center, one of the most important retail project for Hong Kong real estate giant Hang Lung Properties outside of Shanghai that launched last March. The name “Heartland” indicates the importance of the downtown Wuhan Hankou Area to the city’s luxury retail scene.

Spanning 450 thousand square meters, Heartland 66 is Hang Lung’s first large-scale commercial development in Central China. It includes a shopping center, an office tower and a premium service apartment area.

Ip pointed out the “perhaps rather extreme local consumption habits” of Wuhan locals. “”They appreciate branded and expensive items but yet they also would go for relatively low priced items. Wuhan market has lots of potential to grow and change in compare with other mature first-tier cities customers,” Ip explained.

Thus Heartland 66 took on a more diverse mix of brands to cater to their needs, which includes an ice-cream shop for the National spirit brand Moutai. But Ip said luxury and high-end consumption still accounts for a substantial percentage of sales at Heartland 66.

Hang Lung’s Wuhan grand entrance also gave luxury retailers a chance to launch a second shop in the city.

“Luxury brands only tend to enter a market after the completion of premium quality malls by a trusted developer. These projects are likely to have a strong tenant mix, experienced asset management teams, and being in the best location and first-class design specifications,” said James Macdonald, head of Savills Research China.

In the 20 years prior, the department store Wuhan International Plaza, just a short passageway across Heartland 66, hosted the first and only store for many luxury players in the regional market.

Right after Wuhan’s lockdown was lifted in 2020, Louis Vuitton picked the store as the first stop for its “See LV” exhibition, celebrating its 160-year-long history and showing support for the battered city.

According to local media reports, Wuhan International Plaza urged brands to pick-one-or-the-other when Heartland 66 was recruiting tenants. However, brands like Louis Vuitton, Dior, Gucci and Burberry still decided to open a second store across the street.

Luxury brands including Balenciaga, Celine, Loewe, Fendi and Rimowa launched their first Central China store at Heartland 66, while Hermès jumped ship when its lease with Wuhan International Plaza was up, first with a temporary store and popup, and finally a new store this July. The Hermès Heartland 66 store reportedly raked in $4.45 Million on opening day.

“Heartland 66 faced some resistance when it opened last March, So it spent a lot of time and energy to attract brands, including hosting popups and creating marketing moments,” said Shuang Xia, director of strategy consulting at RET, a real estate consulting agency. “But the retail space itself, which allowed luxury brands to open two-storey retail outlets, was one of the most attractive features,” said Xia.

Occupancy rate at Heartland 66 reached 84 percent within the first 10 month of opening, rental income reaching 153 million renminbi, or $22 million and tenant sales volume came close to 1 billion renminbi, or $144 million, in the same period.

Revenue at Heartland 66 surged 184 percent year-over-year to 122 million renminbi, or $17.6 million, in the first six months of this year, the highest increase of all Hang Lung projects in mainland China in the same period.

More than a year after Heartland 66’s launch, local retail insiders see a clear differentiator between the two luxury shopping rivals, with Heartland 66 being geared towards Wuhan local shoppers while Wuhan International Plaza continues to attract out-of-towners in the region.

“It’s the first luxury shopping destination that comes to mind for customers all over Hubei Province,” observed a local retail insider.

For Ip, the market volume of a luxury retailer “goes back to the wider Wuhan region,” he thinks luxury brands have the potential to open two to three doors in the city. “If one plus one is greater than two, then the brands can do it,” said Ip.

For Chunhui Hu, the owner of the fashion boutique HCH in Wuhan, who recently opened a third store at the newly erected MixC Shopping Mall this June, the city’s designer fashion market is also underrated.

“As more young Wuhan-natives leave first-tier cities such as Beijing and Shanghai and return to Wuhan, they bring with them the craving for the latest fashion, which positively influences Wuhan’s fashion market,” said Hu. “Whenever I take a walk around Wuhan shopping malls, I see more and more fashionably-dressed locals.”

According to data from the Wuhan Bureau of Statistics, the permanent population of the megacity reached 13.6 million by the end of 2021, an 8.8 percent increase from the year prior.

“Top-tier Wuhan shoppers spend just as much as first-tier city shoppers, but they are more low-key and like to shop within their concentrated friend groups or social circles, to reach them directly is key to making it in the Wuhan market,” said Sonia Xie, a Wuhan-native and founder of luxury carpet brand Changphel, which is set to open its first store in Wuhan.

Xia thinks once the luxury market establishes their presence in the market, the niche fashion market will follow. “This more personalized shopping experience that fashion boutiques and niche brands offer will show potential then,” he said.

In the second quarter, luxury retail expansion continued in the market. Valentino recently opened at Wuhan International Plaza, taking over the Hermès’ spot. OTB brands, including Marni, Jil Sander and Maison Margiela, are set to open at the shopping mall MixC Wuhan this September. Charlotte Tilbury and Acqua Di Parma will also see their first Central China store at MixC Wuhan.

Chanel is one of the last premium luxury brands yet to enter Wuhan. Industry insiders think the brand might pick SKP as its local partner across the Yangtze River. The Wuhan SKP is set to open in 2023.

According to Ip, the Wuhan retail market is yet to have its breakout moment, but the trend is brewing. “It’s a competition among cities. Wuhan has to fight for the position as the most important commercial and retail center in Central China,” observed Ip.

Wuhan’s retail future also hinges on whether its neighboring retail hubs, such as Changsha or Zhengzhou, will divert shopper’s attention, “but I don’t see them having a peak moment yet. Wuhan will be the first,” said Ye.

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