High returns require high standards of development and management, said Zhou.

In the next few years, a lot of retail area is scheduled to come into the market, according to James Macdonald, head of research in China for Savills.

Beijing and Shanghai may see their retail stock increase by 14 percent and 30 percent, respectively, from the end of 2012 to the end of 2014.

Chengdu in Sichuan province, Shenyang in Liaoning province and the Chongqing municipality are expected to see their retail space expand by 88 percent, 50 percent and 53 percent, respectively, during the period, Macdonald said.

"We have noticed there is an oversupply in some areas of some cities, such as remote, suburban parts of second-tier and third-tier cities. The suggestion for developers focused on shopping mall investment is to be more prudent," said Xie.

Malls in cities such as Shenyang in Liaoning province are competing for a limited number of tenants and some of these centers are largely vacant, added Xie.

In the long run, retail projects offer a ray of hope in China's commercial property market, analysts said. In Shanghai, the average gross yield of prime retail projects ranges from 5.5 to 6.5 percent, while prime offices are closer to between 5 and 6 percent, according to Macdonald.

Serviced apartments offer a yield of about 4 to 5 percent, while strata-title residential developments tend to be in a 2.5 to 3 percent range, according to Savills' data.

Office investments tend to be somewhat more straightforward, making it easier to understand the project's prospects. They also offer more exit strategies, such as strata selling or offloading the property to another investment fund.

Retail investments require specialized teams to extract the maximum value from the project and are hard to exit, but if done well, they can certainly produce high returns, analysts said.

Ren Zhe contributed to this story.