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The downside of upscale malls
By John Dennis and Victor Zarnowski |
November 16, 2009, Monday
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Print Edition
Print Edition
CHINA'S acceptance of the Western-style enclosed shopping mall as an essential element in its economic and social development was one topic addressed at the International Council of Shopping Centers Asia-Pacific Convention held in Singapore in mid-October.
By world standards, many of China's new malls are vast, and they frequently target the highest end of the retail market. Even in Shanghai's suburban locations and the country's third-tier cities, retail mall developers hope somehow to have Louis Vuitton and Gucci occupying their main road shops.
This may be a commendable ambition for Nanjing and Huaihuai roads, but in many other locations it is inappropriate and unachievable.
Before starting a project, developers need to study the demographics, wealth, disposable income and lifestyle aspirations of target customers. The resulting tenant mix, from analysis rather than a desire for five-star status for its own sake, will ensure commercial success.
Another important but unfortunate characteristic of retail projects in China is their subdivision into a maze of small shops, each to be sold off the plan for an instant and easy developer profit.
Many Chinese developers come from a residential property development background, where selling off the plan is standard practice. So, for quick returns and to avoid ongoing management responsibility, tiny shops are sold to inexperienced but optimistic small investors.
This was the business model of early mall developers in Singapore. Within a few years these malls, suffering from a random tenant mix, unfilled vacancies and no promotion, became both an economic and social disaster. In Singapore the only effective solution, despite its cost and legal complexity, was to regain control of dying malls by buying back each individual shop.
A shopping mall is very different from most other types of property development. It must be viewed as a long-term asset requiring active ongoing management, not as a means for short-term profit.
Shopping malls are a unique and important building type. They do not just provide a setting for economic activity, but an environment for people to spend their scarce leisure time together.
Providing generous public space, which costs money to build and maintain but provides no direct income, reduces the leasable area, but it is good for the malls' long-term benefit.
(John Dennis and Victor Zarnowski are principals of Buchan Group International, Melbourne-based retail architects and interior designers. E-mail: johnd@pcal.com.cn)
By world standards, many of China's new malls are vast, and they frequently target the highest end of the retail market. Even in Shanghai's suburban locations and the country's third-tier cities, retail mall developers hope somehow to have Louis Vuitton and Gucci occupying their main road shops.
This may be a commendable ambition for Nanjing and Huaihuai roads, but in many other locations it is inappropriate and unachievable.
Before starting a project, developers need to study the demographics, wealth, disposable income and lifestyle aspirations of target customers. The resulting tenant mix, from analysis rather than a desire for five-star status for its own sake, will ensure commercial success.
Another important but unfortunate characteristic of retail projects in China is their subdivision into a maze of small shops, each to be sold off the plan for an instant and easy developer profit.
Many Chinese developers come from a residential property development background, where selling off the plan is standard practice. So, for quick returns and to avoid ongoing management responsibility, tiny shops are sold to inexperienced but optimistic small investors.
This was the business model of early mall developers in Singapore. Within a few years these malls, suffering from a random tenant mix, unfilled vacancies and no promotion, became both an economic and social disaster. In Singapore the only effective solution, despite its cost and legal complexity, was to regain control of dying malls by buying back each individual shop.
A shopping mall is very different from most other types of property development. It must be viewed as a long-term asset requiring active ongoing management, not as a means for short-term profit.
Shopping malls are a unique and important building type. They do not just provide a setting for economic activity, but an environment for people to spend their scarce leisure time together.
Providing generous public space, which costs money to build and maintain but provides no direct income, reduces the leasable area, but it is good for the malls' long-term benefit.
(John Dennis and Victor Zarnowski are principals of Buchan Group International, Melbourne-based retail architects and interior designers. E-mail: johnd@pcal.com.cn)
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