Hang Lung ramps up China spree with retail plaza project
Property company spends 760m yuan to acquire Shenyang commercial site in focus on secondary mainland cities
Hang Lung Properties is pressing ahead with a shopping spree for retail projects in secondary mainland cities, spending 760 million yuan acquiring a commercial site in Shenyang, the most mature consumer market in northeast China.
Hang Lung said it would develop the site on Zhongje Road - a hub of mid-end shops - into a 1.39 million-square-foot shopping centre, to be known as Shenyang Hang Lung Plaza.
Executive director Terry Ng Sze-yuen said the developer would announce the acquisition of a similar-sized site in a secondary mainland city in the next two months.
The Shenyang project is the developer's second purchase since announcing an aggressive plan to spend more than 20 billion yuan building 10 shopping centres outside Hong Kong and Shanghai.
'The successful acquisition of the prime lot on Zhongje Road in Shenyang for developing Shenyang Hang Lung Plaza is consistent with Hang Lung's plan to develop large-scale shopping centres throughout China,' the company said.
At the beginning of this year, the firm paid 788 million yuan for a site on Binjian Road in Tianjin's Heping district to develop a 1.5 million sqft shopping centre.
'Construction work on the [Shenyang] project will start early next year and be completed in about three years,' Mr Ng said.
He said the annual rental return from the shopping centre should be about 5 per cent in the first three years.
'I expect the return to go up to 10 per cent to 12 per cent after the fourth year,' he said. 'Part of the reason why we picked Shenyang is that it's a destination for a lot of our existing tenants seeking to set up new branches.'
Mr Ng added that the shopping centre would be an outlet for top-quality luxury goods.
Property consultants said Zhongje Road, with a 300-year trading history, was one of the busiest shopping districts in the city.
'Zhongje Road is traditionally a mid-end shopping district. While most top-notch luxury goods are on Taiyuan Road, it seems the developer is confident of using its brand name to attract luxury brands to the district,' said Joe Zou, a director of property consultant DTZ Debenham Tie Leung, who is stationed in Dalian and covers the Shenyang market.
He said land costs on Zhongje Road were about 20 per cent to 30 per cent lower than on Taiyuan Road.
'Under the central government's encouragement, there has been a surge in retail properties in Shenyang, raising concerns about an oversupply,' Mr Zou said. 'However, there is a strong demand for luxury goods.'
Earlier last year, German retail giant Metro set up its second store in northeast China. The outlet in Shenyang's Tiexi district was the retailer's 21st nationwide.