1、The Dying Shopping MallsThe emerging shopping malls quickly take each part of Chinese cities like the Reaper descending on earth from the outer space in Mass Effect. Between the middle and outer rings of Shanghai， a shopping mall that covers 320 thousand square meters was opened on July 7. In spite
2、of the grilling sunshine， a lot of people swarmed into the shopping mall， causing havoc to the already crowded streets and blocks. “This （the huge number of people） is just like the bloating commercial property in China， ” said an anonymous property consultant， “hot and crowded.” As DTZ estimated， t
3、he real estate retail projects that are going to be sold in Shanghai （including shopping malls， department stores， commercial blocks and real estate projects with certain sizes， small stores on the street excluded） will have the total area of 2.494 million square meters. If you are not amazed at thi
4、s number， then you should known that the area of sold retail property projects from 2000 to June 2013 in Shanghai was only 10.912 million square meters. The crazy expansion of shopping malls is not exclusive to Shanghai. Instead， it could be seen everywhere of China， from the coastal cities in East
5、China to the inland provinces of West China， from metropoliss CBD to small counties core business centers. Jones Lang LaSalle， a real estate investment management and service company that has businesses in 700 cities of 60 countries， forecasted that the number of newly-added shopping malls in China
6、will hit the historical high in 2013. Jones Lang LaSalle also monitored 20 main cities in China and found that about 150 shopping malls could be opened in these cities this year. The size of these new buildings is increasing as well ? the average area of these new shopping malls exceeds 80 thousand
7、square meters. “Some inexperienced property developers hope to complete their projects before the competition gets intensified. They are also likely to increase the size of their projects because they believe that the bigger these shopping malls are， the more competitive they should be. In addition，
8、 the title as the largest shopping mall in a city is good for marketing， as they believed.” However， things are not like this， as pointed out by Knight Frank， an international property consultancy company in its report. The Widespread Trend “Compared with the residential house market， the commercial
9、 property is a field that is more likely to have bubbles， ” said a vice president of a Hong Kong-based real estate company. The inflow of a large amount of capital in a short has quickly overdrawn the potential. Deloitte and China Association of Chain Operation published a research report in January
10、 2013， which figured out the fast expansion of investment in the property market with numbers： the investment into Chinese commercial property kept the 12% annual growth rate from 2008 and the growth rate hit the peak of 30% when the Chinese government issued the policy of controlling the residentia
11、l property market， higher than the average growth rate of investment into Chinas real estate market. In 2011， the commercial property of China received the investment of RMB 7.424 billion， up 31% year on year. In 2012 the growth rate met a slight drop but still reached 25%. In this feast of commerci
12、al property investment， foreign developers， domestic state-owned enterprises and private companies all put into high gear to contend for the market. Among all foreign investors， Singapore-based Carlyle Group has the best achievements. In 2012 it opened seven shopping ma； in China and will open three
13、 more in 2013. In addition， some less famed foreign real estate companies also boast great ambitions in China. The Philippinesbased SM Group is investing heavily into the SM City Square in Tianjin， which is said to cover 530 thousand square meters? the largest single shopping mall in Asia. This Phil
14、ippine company hopes to open a new shopping mall in China every year before 2015. “We believe that the increasing disposable income of Chinese residents will bring about the development of retail. In addition， Chinese governments policy of pulling up domestic demand will drive the development of ret
15、ail as well， ” said Guidote， Vice President of Investors Relations at SM Group. “We are going to have seven shopping malls in China by 2015. And by then we might think of listing our assets in China to release the value of those assets. Hong Kong and Singapore are good choices for going public.” Man
16、y overseas investors share the same idea with SM Group. They are very optimistic about the outlook of Chinas retail industry. However， American Property Researchs founder Vernon Martin thought that the overseas investors are too “na？ve” when it comes to Chinas retail business. “For those na？ ve over
17、seas investors， Chinas economic miracle is exaggerated， ” said Martin. He quoted the data from Chine Economic Index Center， stating that the proportion of consumption in GDP in China had an apparent drop compared with 10 years ago. From the viewpoint of market demand， the declining consumption will
18、not provide any optimistic reasons for the trend of building hopping malls. But truth to be told， foreign investors like Carlyle and SM only play minor roles in the formation of shopping mall bubble in China， the main force still comes from domestic companies， such as Wanda Group， Greenland， or even
19、 non-real estate development companies like COFCO and Huarun Group. Take Wanda Group， one of the well-established property companies in China， for example： in 2012 it opened 17 Wanda Squares and one Wanda Center ? all are impressive shopping centers. They are to be joined by 20 Wanda Squares in 2013
20、. Apart from those top real estate development companies， several medium-sized companies are also busy expanding their domains of shopping malls. For example， Golden Eagle Group， which used to focus on retail business， opened 17 shopping malls in the past four years and is going to open 15 new outle
21、ts from 2014 to 2016. “Sometimes， property developers do not enter the commercial property market out of their own will， ” said the aforementioned Hong Kong property companys vice president.“It is often because that local governments usually require a certain part of land to be used for commercial p
22、roperty when they sell land with good locations to the developers.” Yu Liang， President of Wanke Group， said in a press conference that Wanke Group is very cautious when it comes to the commercial property and has not seen a perfect business pattern so far. “So Wanke Group was forced to get engaged
23、in the commercial property for the sake of land”. But there are also reverse situations. The difficulty of developing shopping malls is the weapon property companies use to get the land with less money. Since shopping malls， once opened， could bring great benefits of employment， tax and augmentation
24、 of surrounding lands value， local governments are very willing to welcome any property development companies that want to make commercial property projects or comprehensive projects in their places. James Hawkey， Managing Director of Property Retail Service at Cushman & Wakefield Asia-Pacific， said
25、 that the current land supply system in China is an important factor luring property companies into commercial property. “The supply of land for residential property is to a big extent decided by the Urban Planning Department of each city， while land that can be gained through auctions are usually u
26、sed for commercial property or comprehensive projects （both for residential and commercial use） ， ” he said. In James Hawkeys opinion， that land supply system depegged the area of shopping malls from the expected market demand； instead， it connects the area with the largest available area of the lan
27、d slot. But such an area might not be suitable. In addition， the governments usually set up limitations over the time that property developers can use the land， forcing them to abandon the plan of developing the land gradually and stopping them from developing shopping malls that could match the eco
28、nomic level of this area. The Worrying Status Quo Generally speaking， building a shopping mall costs 2 or 3 years. But the market could change overnight. The developers that rush into the commercial property soon found what is going to greet them in this hot market. As reported by Deloitte and China
29、 Association of Chain Operation， there had been 2，812 shopping centers established in China by the end of 2011， and the figure is expected to increase to 4，000 in 2015. The report also said that the development of shopping malls in China is increasing in size and more shopping malls have found their
30、 ways into suburban areas and lesser cities in recent years. “The large shopping malls are good for providing consumers with one-stop shopping experiences， ” said the report. “Notable is the fact that large-sized shopping malls can increase the appeal for consumers， but bring bigger stress for opera
31、tors to recruit retailers and sustain the operation. For shopping malls， the bigger， the better no longer works. A good shopping mall needs a proper size for its positioning and to seek the balance between revenue and area.” Actually， in some big Chinese cities with a larger population and stronger
32、consumption power， the difficulties of recruiting suppliers for the increasing number of shopping malls and satisfying the higher rents have already shown themselves. The data from DTZ showed that the occupancy rate of major business centers in Shanghai in the second quarter of 2013 was lower than t
33、he average level in the past two years. The rents in the Top 5 business centers ? West Nanjing Road， East Nanjing Road， Huaihai Road， Lujiazui and Xujiahui ? kept increasing from 2009， but the increase began to slow down in the second quarter of 2013， meaning that the retailers could not afford the
34、rents anymore. “The initial success of shopping malls depends on whether they can recruit high-quality retailers and how many they can. They also need to attract the attention of consumers. There are more new shopping malls opened in this year， but most retailers chose the conservative expansion str
35、ategies， leading to the challenges that are given to shopping malls from the very start. Therefore， some projects chose to postpone their opening time， and some chose to lower the standards of their brand portfolio， ” said James Hawkey. The research report from DTZ showed that the growth in the sale
36、s volume of the entire retail market began to slow down from the end of 2012 to the beginning of 2013. In 2012， only two or three shopping malls in Shanghai and Beijing saw the higher growth rate in sales volume while others had to endure the slowed growth rate. “The stagnant development of retail a
37、ctually rang an alarm for us， ” said Dung Ng Shun， “In many cities， we have seen the situation that the less attractive shopping malls have fewer consumers and worn-out retailers， ” said James Hawkey. “We believe that the situation will be more common in 2014. The supply of shopping mallsslots is al
38、ready larger than the demand.” In James Hawkeys opinion， in the next 2-3 years， the high-quality retailers might have to wait in a queue to get into some good shopping malls， while other shopping malls might find it difficult to recruit any good retailers. The problems are mainly caused by several f
39、actors： the retailers are short in the experiences of running shopping malls； there are no supporting facilities around； the brand portfolio is not good； or the competition is very furious. Cushman & Wakefield Research Department published a group of data revealing the vacancy rate of shopping malls. In the first-tier cities the vacancy rate is close to 10%， while in some second-tier cities like Chongqing， Shenyang， Qingdao and Xiamen， the vacancy rate is as high as 15%-20%.
