Com­mer­cial growth picks up

China Daily (Canada) - - SHANGHAI - By WU YIYAO in Shang­hai wuyiyao@chi­nadaily.com.cn

While hous­ing prop­erty devel­op­ment has ex­pe­ri­enced a hard time across China, com­mer­cial prop­erty devel­op­ment is pick­ing up in the face of the ar­gu­ment that brick-and­mor­tar re­tail­ers are be­ing squeezed by on­line shop­ping tak­ing mar­ket share from them.

Some re­tail­ers are turn­ing them­selves into com­mer­cial prop­erty de­vel­op­ers across China, tak­ing a large amount of land, a re­cent re­port by DTZ China said.

While for­eign re­tail­ers look for de­creas­ing rent and gain­ing prof­its from a prop­erty’s growth in value, China’s lo­cal re­tail­ers are in­clined to gain prof­its from re­tail op­er­a­tions and prop­erty devel­op­ment, said Fair Fan, head of re­tail, DTZ East China.

The trend started in 2010, ac­cel­er­ated in 2012, and has en­tered a boom stage in 2014, with an in­creas­ing num­ber of re­tail­ers join­ing the game of prop­erty devel­op­ment, in­clud­ing widely known Haier, Sun­ing and

It’s so... huge. Once I drove on the over­pass and saw one end of the project, and af­ter two min­utes, I hadn’t seen the other end of the twin tower. I guess it may take more than one day if want to visit each store in the shop­ping area.”

LI JIAN­FENG, 54-YEAR-OLD SHANG­HAI RES­I­DENT

Yuex­ing Fur­ni­ture.

Euro­pean brands such as AEON and Ikea have also set up shop­ping cen­ters in some cities, ac­quir­ing their own land and end­ing be­ing ten­ants in those places.

“This is a sig­nif­i­cant sig­nal that re­tail­ers are chang­ing their strate­gies rapidly to meet mar­ket de­mands,” Fan said.

Ac­cord­ing to data from CBRE, a prop­erty-ser­vices provider, shop­ping cen­ters un­der con­struc­tion in China have com­bined space of some 20 mil­lion square me­ters, more than half the to­tal in 190 coun­tries.

In Shang­hai alone, shop­ping cen­ters with com­bined space of about 3 mil­lion sq m are un­der con­struc­tion, ac­cord­ing to CBRE data.

Spa­cious, di­ver­si­fied and brand new are among con­sumers’ com­ments when they stroll across newly built shop­ping cen­ters de­vel­oped by re­tail brands.

In Shang­hai, the 320,000-sq-m Global Har­bour shop­ping area, de­vel­oped by Yuex­ing Fur­ni­ture and launched in July 2013, is still among many lo­cal res­i­dents’ places to go.

“It’s so... huge. Once I drove on the over­pass and saw one end of the project, and af­ter two min­utes, I hadn’t seen the other end of the twin tower. I guess it may take more than one day if want to visit each store in the shop­ping area,” said Li Jian­feng, a 54-year-old Shang­hai res­i­dent.

Yuex­ing Fur­ni­ture’s another project in Changzhou, a city in Jiangsu province, is about 880,000 sq m in­clud­ing a 380,000-sq-m shop­ping area, which is ex­pected to be launched in the end of 2014.

Sun­ing, a re­tailer which fo­cuses on elec­tric home ap­pli­ances, also has speeded up its ex­pan­sion in the coun­try. It has space re­served at some 80 Sun­ing plazas in Bei­jing, Shang­hai, Nan­jing, Tian­jin and other fir­stand-sec­ond-tier cities.

In­ter IKEA Cen­ter Group projects have landed in Jiangsu province’s Wuxi, Hubei province’s Wuhan and Bei­jing. Each of the projects is more than 150,000 sq m, and the one in Bei­jing is ex­pected to reach 207,000 sq m.

For re­tail­ers, their own brands may be a bar­gain­ing power when bid­ding for land, and their own brands are also among ma­jor ten­ants for new projects, which may save cost and ef­fort in the leas­ing process. Once the model ma­tures in one city, it can be eas­ily repli­cated to other places amid fast ex­pan­sion, said Fan.

Some brands such as IKEA, Sun­ing, Haier, Red Star Ma­call­ine are al­ready widely known, and they are among ma­jor tax­pay­ers in many lo­cal­i­ties, giv­ing them ad­van­tages in bid­ding for land parcels for com­mer­cial devel­op­ment, said Fan.

On the other hand, de­vel­op­ing a com­mer­cial prop­erty is quite dif­fer­ent from op­er­at­ing a re­tailer.

“Re­tail­ers on this track must be aware of pos­si­ble weak­nesses in fi­nanc­ing, tal­ent and ex­pe­ri­ences, and may con­sider co­op­er­at­ing with ma­ture land de­vel­op­ers,” said Fan.

Am­ple sup­plies of large-space shop­ping cen­ters may not sup­port rent growth in the short term, said mar­ket in­sid­ers.

In Shang­hai, the sup­ply of shop­ping-cen­ter space may grow at the pace of 100,000-sq m each year be­tween 2014 and 2016, and some de­vel­op­ers may de­crease rents to ap­peal to ten­ants, ac­cord­ing to Theodore Knipf­ing, direc­tor of re­tail ten­ant rep­re­sen­ta­tion in the Asia-Pa­cific re­gion with Cush­man & Wake­field, a global real es­tate firm.

The Global Har­bour shop­ping area, de­vel­oped by Yuex­ing Fur­ni­ture and launched in July 2013, is a pop­u­lar place to go for lo­cal res­i­dents in Shang­hai.

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