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New shopping malls in China reach new high in 2013 as retail markets pick up, and the focus on ‘lifestyle centres’ increases

150 new malls set to open in 20 markets across China in 2013


SINGAPORE, 04 July 2013 – Retail sales slowed in China in late 2012 and early 2013, due to weaker consumer sentiment. In late 2012, only the top two or three of Shanghai and Beijing’s department stores were still reporting positive sales growth; the rest were negative. However, Jones Lang LaSalle’s industry experts are predicting healthier growth in the second half of 2013.

Eugene Tang, Regional Director and Head of Retail, Shanghai and Greater China, Jones Lang LaSalle comments, “The retail slowdown in 2012 was a wake-up call. Retailers will now be more cautious, analyse individual Chinese markets more carefully and follow a bottom-line driven strategy rather than investing in brand exposure. The result should be healthier growth in the second half of 2013 and 2014.”

“The slowdown we saw last year seems to be receding, and we expect confidence to pick up,” adds Steven McCord, Local Director, China Retail Research, Jones Lang LaSalle in Shanghai. “Policymakers are serious about promoting consumerism to play a stronger part in overall economic growth, and this should have a positive impact.”
Record numbers of new malls
Jones Lang LaSalle’s research shows that the total number of new shopping malls in China is likely to reach a new high this year, with around 150 opening in the top 20 markets. The research also shows that mall sizes are increasing; the average size of a new mall will exceed 80,000 sqm, whilst the average size in 2005 was 66,000. In Shanghai, for example, Global Harbour opening in 2013 will total 320,000 sqm, with shop space of around 40,000-50,000 sqm per floor. This is the equivalent of nearly 45 professional soccer fields. Another large mall expected to open soon is IAPM by Sun Hung Kai in Shanghai, which will total 120,000 sqm.

“We expect to see up to three million sqm of new retail space in the next three years in Shanghai, and maybe three to four million sqm in Chengdu,” says Eugene Tang. “On top of that emerging cities, such as Jinan, Hefei, Kunming and Changzhou, are adding large quantities of retail real estate. We think that this trend is likely to continue in 3rd and 4th tier cities in the next few years.”
Today, retailers have more location choices than ever before and making informed choices when selecting a site has become essential.
The right business strategy to meet future challenges
Despite this positive upturn in retail markets in the country, shopping malls will continue to face challenges in adjusting to a changing market environment and will need to upgrade their business models in response these challenges.
With so many new malls opening, the competition to attract high-calibre retailers is fierce. Competition between malls is also placing managers under greater pressure to differentiate their properties in terms of design and traffic flow, tenant mix, theme, customer base and market positioning. This means high quality retail asset management goes a long way to help a mall to stand out from the crowd.

At the same time, a new challenge is emerging: the growth of online retail. E-commerce does not mean the end of the shopping mall in China, but the rise of e-commerce has limited the opportunities in the mass retail market, especially in the weakly branded brick-and-mortar fashion segment, because price sensitive consumers are able to shop online at lower prices. As a result, mall operators are seeking ways to inoculate themselves against the rise of e-commerce.
So what can they do? Shopping malls can adjust their tenant mix to prioritize food and beverage (F&B), entertainment and other services that cannot go online, but which drive foot traffic and add to the overall mall experience. These non-traditional retail elements have increased from an average of 30 percent of occupied space to 33 percent in the last two years in the Shanghai decentralized market. Among newly opened shopping centres, non-traditional elements can account for as much as 45 percent of store space.

Steven McCord explains: “Non-traditional retail elements, such as F&B, entertainment and value-added services, such as education centres, are increasingly important to the tenant mix. Some mall owners are making it a strategic priority to have as much as 60-70% of space dedicated to food and beverage and entertainment, such as movie theatres, game arcades and karaoke. They also put in a lot of service-oriented tenants such as early education centres, English schools, and weight-loss clinics. This is excellent from a foot traffic generation perspective. These are all things that can’t go online.”

“The food and entertainment focus goes hand in hand with the trend towards “lifestyle centres”. 1891 mall on the Yangtze riverfront in Chongqing and SOHO Fuxing Plaza in Shanghai are just two new examples among many new F&B-centric retail developments. We also see decentralized malls in residential areas emphasizing more services tenants; Sky Mall in Minhang district, Shanghai is a good example of this. As the internet becomes more established in China and e-commerce continues to grow, the trend towards lifestyle shopping malls is also set to increase.”

“At the same time, we are starting to see the increasing success of home-grown shopping centres developed locally in locations that include China’s emerging Tier II cities. With the help of global consultants, China’s developers are taking inspiration from around the world and creating a generation of shopping malls that, thanks to better quality and execution, are able to break away from the pack and become leaders in their respective markets.” 


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About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $47.7 billion of real estate assets under management.
Jones Lang LaSalle has over 50 years of experience in Asia Pacific, with over 25,400 employees operating in 78 offices in 14 countries across the region. The firm was named ‘Best Property Consultancy’ in nine Asia Pacific countries at the International Property Awards Asia Pacific 2012, in association with HSBC, and was named the number one real estate advisory firm in Asia Pacific in the Euromoney Real Estate Awards 2012. 
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