Glut of China shopping malls a problem for those in poor locations
Only 10 to 15 per cent of China’s 83 million square metres of shopping malls judged international grade
Chengdu’s shopping mall industry is undergoing a major overhaul that might lead to closures for those with a poor mix of tenants and poor facilities.
International-grade malls in prime locations are expected to post more gains at the expense of their sub-standard peers, whose tenants are now moving out and setting up shop in bigger and better malls, industry experts say.
They said owners of poorly managed malls would be squeezed further and find it increasingly difficult to survive due to the huge existing stock of retail premises, estimated at 4.96 million square metres.
“It might take more than eight years for the market to absorb this large stock,” said Michael Wu, a director for Western China at DTZ/ Cushman & Wakefield.
“In the past few years, more and more new malls as large 100,000 square metres have opened their doors for business.”
An unprecedented number of retail developments has sprouted across the mainland to cash in on rising consumer spending amid and the government’s shift to consumerism as an economic driver.
In the past few years, more and more new malls as large 100,000 square metres have opened their doors for business
But the retail market continues to get worse amid slowing economic growth, poor stock market performance and Beijing’s anti-corruption campaign that has curtailed spending on luxury goods.
Visits to three malls within Chengdu’s the first ring road – Yandlord Landmark, Yang Guang Xin Ye and The One – on Thursday and Friday revealed one common denominator: very few shoppers.
On the third floor of Yang Guang Xin Ye, there was a long row of empty spaces and a big restaurant had its door chained shut and padlocked.
“Landlords of poorly positioned malls mostly owned by domestic developers have been forced to give long rent-free periods or cut monthly rent to fill up the mall. We have seen some cases of tenants refusing to pay rent or even closing their stores because of low sales,” Wu said.
He said such malls needed to readjustment their trade mix.
In a study by JLL, only 10 per cent to 15 per cent of China’s 83 million square metres of shopping malls were judged international grade.
“The retail industry is quickly finding itself in uncharted territory with a huge influx of new shopping malls coinciding with rapid adoption of e-commerce by China’s consumers,” JLL said.
Wu said top brands would shift to new malls in prime locations, like Wharf Holdings’ Chengdu International Finance Square (IFS) and Taikoo Li, a joint venture between Swire Properties and Sino Ocean Land.
“The two integrated developments have become established as landmarks in Chengdu’s retail landscape in terms of quality and rent,” he said.
Christina Hau, general manager for operations at Wharf China Estates said its 204,000 square metre IFS mall would serve the whole western part of China and not just Chengdu.
“We are a lifestyle mall instead of only targeting the luxury market. Shoppers can come here to buy a bottle of water at our supermarket or eat at our food court,” she said.
Hau said luxury brands accounted for 15 per cent of tenants , 34 per cent were mid to high- end brands, 33 per cent were food and beverage, bowling and cinema and the rest were retailers selling lifestyle products.
The mall is part of the 16 billion yuan IFS which also include a 230-room Niccolo Hotel and three grade-A office towers.
Monthly retail rents ranged from 1,300 yuan per square metre to 1,800 yuan per square metre, she said.
Wharf won the site at a government auction for 7.2 billion yuan.
