Commercial growth picks up
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
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.