Taubman Asia moves into shopping mall market in China
Taubman Asia is venturing into the mainland by opening shopping centres in Xian and Zhengzhou, which president Rene Tremblay says are the first steps into the huge market
Rene Tremblay, president of Taubman Asia, the Asian arm of US mall operator Taubman Centres, is responsible for driving Taubman’s shopping centre expansion in Asia-Pacific.
Appointed to his current position in October 2010, he has more than 30 years of experience in the real estate industry, having been involved in international investments for almost 20 years. Before joining Taubman, he was the executive vice-president, real estate, and president of the real estate group of Caisse de depot et placement du Quebec, one of the 10 largest property portfolios in the world.
Why did Taubman Asia choose Xian in Shaanxi and Zhengzhou in Henan for its foray into China?
When we were deciding our China strategy, we selected 31 cities and shortlisted eight. Xian and Zhengzhou were part of the eight that we identified as having great potential.
Do you have a target number of shopping centres to be opened on the mainland?
At this point, it is very difficult to speculate on the number of properties we will have. China is a huge market and we want to become a meaningful player. Naturally, we are monitoring all the opportunities present to us on the mainland. At this point, we want to make sure the progress of our existing projects is going well. Eventually and naturally there will be more. If you ask me “what are your plans in the short or long term”, we try to be prudent, as we will do things step by step. It is just a matter of managing the timing.
Can you provide an update on the two shopping centres, CityOn.Xian and CityOn.Zhengzhou?
Yes, we have started pre-leasing. We are pretty pleased with the progress right now. The good news about these two projects is if you have quality, you will have support from retailers.
How did Taubman Asia and the state-owned enterprise Beijing Wangfujing Department Store become joint venture partners in the shopping centres?
We have known each other for eight years and built up trust and a respectful relationship with Beijing Wangfujing. [They have] intimate knowledge of Chinese consumers and wanted to be present in the retail property development sector. It is a perfect match as Taubman has partnership in our DNA, and we want to do business in China.
Will the joint venture look for more projects in the future?
It is a non-exclusive relationship but we are getting along very well. You may expect we could have other projects with them.
What are the benefits of investing through a partnership?
The good news is that with our two partners [Beijing Wangfujing and Korea’s Shinsegae], they have knowledge of local consumers and retail markets. They also were approached by lots of local developers [offering] anchor tenants in the new projects.
It gives us opportunities to invest in these projects. For instance, Beijing Wangfujing, on top of being an investor, will also have its department store as an anchor tenant in our projects.
Who are the target customers for the two shopping centres?
Zhengzhou will cater more to the medium-to-high sector and young families, while Xian’s market position will be set a little higher. Its mix will be what local consumers in the middle and upper-middle class can afford.
Do you worry that sales at CityOn.Xian will be affected by the anti-graft campaign?
CityOn.Xian is not a super-luxurious mall. It is true some super luxury retailers are slowing down their expansion in China but we see some “affordable luxury” retailers growing fast.
What are the differences between China and the US in terms of tenant mix?
In China, shopping centres need more space for food and beverage outlets. For example, we dedicate 12 to 15 per cent of the [mall] area to food in the US. In China, you need at least twice that area – close to 30 per cent.
Do you have an idea what percentage of tenants will come from overseas?
We expect food and beverage outlets will be mostly local operators. About 75 per cent of fashion brands will be international names, with some coming from the US.
How do you create a successful shopping mall?
You have to do a lot of market research to make sure the design will adapt to the change in the consumer market. If buying power today is at “X” level, five years from now it will be more. You have to make sure your mall in three years from now will not look like it is 10 years old.
There is no magic formula. Just work hard, [have a] good mix of retailers, good planning and good market knowledge.
Will Taubman Asia consider investing in the Hong Kong retail property market?
Hong Kong is a very interesting market with world-class shopping centres. But the problem is pricing. For us, buying existing projects is not our priority. We prefer to develop one and create the value to maximise our profit. Yes, we missed opportunities in Hong Kong. Life is full of choices. You have to decide where you want to be.