Brick-and-mortar malls cement their value in top-tier cities by adapting

By Hu Yuanyuanhuyuanyuan@chinadaily.迷利倉com.cnAlthough China is set to overtake the US as the world's largest online retail sales market by value, the number of new mega-sized malls in its cities shows no signs of abating, industry statistics show.According to international real estate service provider Knight Frank, China has a glut of shopping centers, but experienced operators still enjoy advantages over e-commerce.Meanwhile, the gap between the performances of prime and non-prime shopping centers will only get wider.Last year, a total of 68 new malls opened in 11 first- and second-tier cities, and 52 new malls opened in 2012.Mega-malls remain a strong feature of the retail landscape, particularly in smaller cities, Knight Frank research shows.Meanwhile, the gap between the size of rents charged in first- and second-tier cities has widened, with prime shopping-center rents in first-tier cities rising by some 8 percent, while those in second- tier cities edged down by about 2 percent.Vacancy rates also showed divergent directions. The average vacancy rate for prime shopping centers in second-tier cities grew to 10.9 percent, but in first-tier cities, such as Beijing, the vacancy rate fell by 1.5 percentage points quarter-on-quarter to 4 percent in the fourth quarter of 2013. It was the lowest level since the first quarter of 2000, according to global real estate investment management firm Jones Lang LaSalle.Looking at retailer segments, fast fashion brands and mid-market labels were active in the leasing market.Food and beverage operators, as well as tenancy in the entertainment sector, also continued to expand, a trend that stayed consistent throughout last year, according to Jones Lang LaSalle.International retailers' expansion plans, however, were affected by the moderated growth in overall retail sales in China.Looking back at the rollout plans of the 45 international retailers analyzed by Knight Frank last year, 65 percent of luxury retailers missed their target number of store openings for 2013, whereas most fast-fashion retailers exceeded expansion targets.Meanwhile, online retailing remained a robust tren迷你倉, surging 37 percent year-on-year in 2013 and accounting for 7.4 percent of China's total retail sales, up from 6.3 percent in 2012."Despite the rapid rise in online shopping amid the slowing growth in traditional retailing, we do not predict an abrupt demise of malls. To date, the impact on shopping centers has been felt more toward the lower end of the market with spending per item remaining low online," said Paul Hart, executive director of greater China at Knight Frank."However, if the average-item transaction figure increases significantly, more middle- and upper-tier centers are likely to feel the pressure," he added.For Christian Wright, senior retail consultant, Asia at Woods Bagot, a global design and consulting team, shopping center operators must find new ways to engage and entertain customers."Pop-up shops, art and cultural uses and performance spaces all help to create interest and elements of surprise that encourage repeat visits and prevent monotony," he said."Developers will need to focus more attention on how these centers are designed and how they are managed in the face of e-commerce competition."According to Thomas Lam, director and head of research and consultancy for greater China at Knight Frank: "We see a different type of new shopping center emerging. Developers have been giving more weight to entertainment, and food and beverage in order to adapt to both the challenges and opportunities that e-commerce presents."The industry rule of thumb used to be that F&B should occupy between 20 percent and 25 percent of a shopping center's total leasable area. But this proportion is now up to 35 percent in new shopping centers, along with a rapid rise in cinemas, especially IMAX theaters, across China."We expect that retail sales growth in China will moderate to 10 percent this year," Lam said. Meanwhile, he added, growth in luxury retail sales will slow while that in fast-fashion, mid-range fashion and F&B segments "will maintain strong."Lam predicted that China's total online retail sales will increase by more than 30 percent this year and account for 8.5 percent of total retail sales in China.自存倉