• Fri
  • Dec 19, 2014
  • Updated: 5:20pm

China shopping malls to be more profitable than office space: ARA

Investment firm says growing middle class to ensure returns on investment in shopping centres outdo that in office, residential space

PUBLISHED : Wednesday, 22 May, 2013, 2:47pm
UPDATED : Thursday, 23 May, 2013, 3:31am

Shopping malls will surpass office and residential space as the most profitable type of property investment on the mainland over the next two to five years, thanks to the nation's booming middle class and its fast-growing income, says ARA Asset Management, a property investment firm partly owned by Li Ka-shing.

"District shopping centres with a gross floor area of one million square feet or bigger, and a high [number of visitors] will offer the biggest upside with limited risks for private funds in the coming years on the mainland," said Ng Beng Tiong, the chief executive of ARA Private Funds.

Ng, a former investment banker, is targeting an internal rate of return of 20 per cent with the building and operating of shopping centres on the mainland through the newly raised US$441 million of Asia Dragon Fund II.

HSBC forecasts that 93 million Chinese households will join the middle class by 2015.

The China Chain Store and Franchise Association expects the number of mainland malls to jump 40 per cent to more than 4,000 by 2015.

Not all of the new malls would provide decent returns, so real estate funds would have to be selective, Ng said, warning that the presence of luxury brands did not guarantee fat margins.

"We don't go for malls that are full of Guccis and LVs (LVMH luxury goods), but the ones that serve the daily needs of a large catchment of residents and office workers," Ng said, citing Asia Dragon Fund I's Dalian shopping mall and Festival Walk in Kowloon Tong as examples.

Of the two private funds that closed last year, Ng plans to invest up to 70 per cent of the US$441 million Asia Dragon Fund II on the mainland, of which more than half will go to shopping malls that serve the growing middle class.

"It is the middle-income group that is growing faster in terms of their wealth and buying power, which translates into very strong fundamental support for shopping malls", he said.

The firm, in which Cheung Kong holds a 14 per cent stake, is looking to expand its footprint to key tier-two cities, such as Hangzhou, Suzhou, Guangzhou, Shenzhen, Chongqing, Chengdu and Wuhan. It already has projects under way in Shanghai, Beijing, Dalian and Nanjing.

By 2015, the retail market will double in key tier-two cities, according to HSBC research, and shopping malls will account for 74 per cent of the retail market in these cities, up from 51 per cent currently.


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This article is now closed to comments

You need to pay people more if you want them to purchase in those malls.
It won't be tourist who will help you.
Retail Malls are also key to rebalancing China from exports to consumption, but it has to be sustainable consumption as exemplified by the award-winning Kerry Parkside, Pudong Shanghai which is LEED Gold Certified at our instigation after persuading the Kerry group with the help of their excellent in-house engineers.
The next step is lifestyle malls with an Eco-edutainment emphasis as recently designed for Keppel Land at Seasons City-Gaia Mall, Tianjin Ecocity which features our concept design based on 3 Eden-Project style Biomes, with Marine, Terrestial and Avian themes and attractions.
How Nature designs more for less - by combining optimisation with beauty.
Asynsis Design Director Nigel Reading Talk at Bridge 8
IDEA Lab B-Hive Biomimicry Workshop - Shanghai, 7pm Thursday May 30, 2013
When: 19:30-21:30, Thursday May 30 ~ Where: Bridge 8 III, No.550 Jumen lu, Shanghai, China
More 4 Less. A new optimal design & construction paradigm.
Asynsis Principle-Constructal law Team @ ARUP Foresight & Innovation, London May 2013
****wp.me/p1zCSP-2V via ****twitter.com/ASYNSIS
This assumes that the transition to a consumption driven economy, which took the US and Europe more than 100 years, will occur in a very short period. China already has a dearth of empty shopping malss...when is this suppsoed to really happen I wonder? Shanghai is not representitive of the rest of China....


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