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Developers believe there are five principles of shopping mall development - area demography, the retail-mix, outside competition, the cost of development, and traffic flows to and from the mall.

 For developers in North America and Europe, where shoppers are used to commuting, death or success hinges on finding a better solution to problems than the next operator.

 SAR shopping mall developers have an advantage in that most new Hong Kong malls are designed as part of the ubiquitous mass-residential estate.

 As such, in places such as Swire Properties' Taikoo Shing or Hutchison Whampoa's Whampoa Garden in Hunghom, the problem of luring shoppers is taken care of and success is built-in.

 But the SAR's high urban concentration means there also are opportunities for smaller developers to exploit shopping demands in older areas by modifying existing properties into micro-shopping malls.

 The typical micro-mall features small unit sizes - usually less than 100 square feet to 80 sq ft - lowering the cost of entry for entrepreneurs and start-ups.

 Micro-malls also are distinguished by the relative affordability of the units - they can be purchased easily by small store-owners and investors.

 Plotio Holdings chairman Lai Yiu-keung said: 'For a small-business owner, it's sometimes better buying a small space for yourself than renting a bigger space, where your rents are at the mercy of a big landlord.'  Plotio is a player in the micro-mall development game. It is converting the old Full Moon Theatre in To Kwa Wan to an 18,000 sq ft shopping arcade, with a completion target of the middle of next year.

 Mr Lai said the project was representative of the formula - find a good site in an older building, preferably on a corner and in an older residential neighbourhood, and convert it into a shopping mall to serve the area's convenience needs.

 A large lobby and high ceilings meant easy conversion to retail use, he said. It is also close to the Hong Kong Housing Society's Jubilant Place development.

 The micro-mall market is hugely competitive, with developers hunting for the next big retail niche.

 So far, the most popular, and most copied, micro-mall concepts have been the computer mall - such as the Golden Shopping Arcade in Shamshuipo - and the youth-oriented mall - such as the Sino Land-developed Sino Plaza in Mongkok.

 The Beverly Plaza on Chatham Road in Tsim Sha Tsui is a youth-oriented shopping mall that has sky-rocketed in popularity.

 There are about 300 units in the three-storey centre, almost all of which are 80 sq ft to 90 sq ft.

 Almost all shops are owned independently, with few chain stores willing to operate in such tight confines. The retail-mix concentrates on the latest Japanese and British fashion trends.

 Mabel Li, the 20-year-old manager of a small boutique in the centre, said the small units in Beverly Plaza gave her and her partners the opportunity to open a shop marketing their own designs with a minimal capital investment and low rent.

 'We didn't have a lot of money to invest in our store so it was possible for us to do the decorating ourselves in a small space,' she said, adding that the low rents helped reduce the pressure to produce sales.

 Pedestrian traffic was heavy on the weekends which, combined with the fashion orientation of the mall, meant there was little need for advertising, Ms Li said.

 'Our clientele already comes to this mall on their own, so we just need to be in a visible part of the mall to be noticed.'  Property agent Goldbest International's manager May Lui said rents at the Beverly Plaza ranged between $11,000 and $12,000 per month for an 80 sq ft unit, having risen consistently over the past two to three years, from $8,000 in 1994.

 She said sales prices also had increased over the same period, helped by the low number of transactions. A typical 80 sq ft unit on the upper floors sells for about $1.6 million.

 The lack of chain stores - which are looked upon to make stable rental contributions and lessen the risk for investors - does not necessarily make a micro-mall a less attractive investment, given the possibility of high yields.

 Henderson Land Development owns 70 per cent of the ground-floor units at the Beverly Plaza.

 Micro-malls can also be extremely lucrative for developers.

 Plotio's 50,000 sq ft Manly Plaza project in Quarry Bay was a cheap investment, Mr Lai said.

 'We acquired a basement warehouse and three street-level units to put in some escalators to go down there,' he said.

 From an investment of about $110 million, half on renovations, Plotio already has received $100 million in revenue from units sold.

 The rest of the mall generates $1 million per month in rental income - 80 per cent of the mall has been rented out, including two large anchor tenants, the Wellcome supermarket and fast-food chain Wendy's.

 The rest of Manly Plaza's units are 70 sq ft to 200 sq ft, and concentrated in the smaller sizes. Rents are $30 to $90 per sq ft per month.

 Despite the success stories, Midland Realty's assistant general manager of retail properties Raymond Kwok said it could be dangerous for an investor to be exposed too heavily to the micro-mall market, especially in properties concentrated in a narrow niche.

 'There are a lot of malls that copycat Beverly Plaza and Golden Shopping Arcade, some of which even in dense pedestrian areas like Chic Plaza on Soy Street in Mongkok, but many of them aren't doing well,' he said.

 The types of businesses suitable for micro-malls are very narrow and a change in consumer tastes could quickly devastate an investment.

 Still, given Hong Kong's abundance of older urban areas and the high population density, it is a bet many smaller developers still think worth making.

NICE 'N' NEAT High urban intensity provides opportunities for developers Low cost gives easier start-up for investors Few chain stores willing to work in tight confines It's sometimes better to rent a small space rather than be at the mercy of a big landlord 



Small means sweet for micro-mall operators