OUE Commercial REIT - Annual Report 2021

INDEPENDENT MARKET REVIEW SHANGHAI Rents First-floor shopping mall rents increased 1.3% in 2021 to an average of RMB26.5 psm per day. Prime retail area rents increased 1.4% YoY to an average of RMB50.7 psm per day, while non-prime area rents increased 1.2% YoY to an average of RMB16.4 psm per day. The highest rents were achieved along Nanjing West Road at RMB67.1 psm per day, whilst Huaihai Middle Road rents increased 1.1% in 2021 to RMB40.0 psm per day. 25 Retail Market Outlook Shanghai was one of the five cities identified by China’s Ministry of Commerce to take the lead in developing international consumption in China, with the other cities being Beijing, Guangzhou, Tianjin and Chongqing. The authorities plan to pool quality international market entities, goods and services, as well as to accelerate the cultivation of local brands. Consequently, Chinese brands have gained more attention in recent years from young consumers due to their rapidly improving quality, traditional elements combined with localised tastes and their familiarity with both online and offline marketing. International brands, including luxury brands, are looking to localise products by collaborating with Chinese brands and designers, while also using more innovative marketing strategies and interactive store designs. At the same time, more emerging brands are expected to continue to enter the market. New supply is expected to average 759,000 sq m per annum between 2022 to 2024, roughly half that of 2021 levels. Benchmark projects in prime areas such as Shanghai ITC Phase 3 (2023) and CPIC Xintiandi Commercial Centre (2023) will greatly improve Shanghai’s high- end market. As fewer retail land plots are launched, the pace of market consolidation is expected to accelerate with leading developers and operators seen to dominate the development market. More boutique firms on the other hand are likely to focus on small and mid-scale projects in need of repositioning and refurbishment. While supply levels may be moderating over the next five years, they still remain high. With rebound momentum waning given ongoing COVID-19 disruptions and a slowing economy, vacancy rates are expected to stay at close-to- current levels or rise slightly in response to increased competition. Improving building standards and services will continue to distinguish successful projects, with retailers willing to pay higher rents to secure a location in high quality, leading developments. 25 Prime Retail and Huaihai Middle Road Sub-market First Floor Rents 2016 (RMB psm per day) 55 50 45 40 35 30 Prime Huaihai Middle Road 2021 2019 2020 2017 2018 Source: Savills Research 74 O U E COMM E R C I A L R E I T