Does Shanghai need this many shopping malls?

The city is currently constructing the most shopping centres in the world

Shanghai's largest mall, Global Harbor.
Shanghai is currently construcing more malls than any other city in the world. Is the sector fast approaching saturation point? Time Out investigate. 

Shanghai is a city known for its shopping; you can’t turn a corner without tripping over another identikit mall. But it seems we still don’t have enough – research shows this city is building more shopping space than any other in the world.

According to a recent report from property agent CBRE, more than half of the world’s retail development is in China, with 3.3 million square metres currently under construction in Shanghai alone. To put this into perspective, the IAPM Mall on Huaihai Lu is 80,000 sqm – so that equals almost 42 more IAPMs opening in the city before the end of next year.

New retail space to open in the next two years includes areas within the 128-storey Shanghai Tower, boutique outlets at Soho Fuxing Plaza beside Xintiandi metro station, developments around the new Hongqiao business and transport district, and a 50,000 sqm shopping development beside Shanghai Disneyland.

"Snoopy-crop"

Not surprisingly, a lot of this space will be built in suburban areas, outside of the crowded city centre, with recent additions the K11 ‘art mall’ and the Jingan Kerry Centre two of the few new entrants to have bagged a rapidly disappearing downtown spot. The CBRE report is predicting that be built in suburban areas, outside of the crowded city centre, with recent additions the K11 ‘art mall’ and the Jingan Kerry Centre two of the few new entrants to have bagged a rapidly disappearing downtown spot. The CBRE report is predicting that this ‘decentralisation’ trend will continue in the coming years, largely due to population growth and the city’s expansion. Some of the hotspots for future retail development include Wujiaochang in Yangpu district, Xinzhuang at the southern end of Line 1, Qibao water town and its surrounding area, plus the new Hongqiao hub. 

But does the city really need this many new shops? Life is already difficult for retailers, facing massive structural challenges from online shopping. China is already the biggest online market, and by 2018 sales from e-commerce in China will exceed those in the rest of the world combined, predicts Morgan Stanley. Bain & Company research suggests online retail in China will grow three times faster than overall retail in coming years. By the end of this year, the country is expected to lead the world in mobile sales too.

With huge web operations like Taobao offering everything at the click of a button, shoppers are putting more of their spend towards online shopping and less towards bricks and mortar.

"K11-pig-crop"

But there are other issues unique to China. One is the inexperience of many domestic developers – as the Chinese government cracked down on residential sales and development, many property companies decided to shift to retail development instead.

‘There are an enormous number of inexperienced developers and operators now trying their hand in retail, producing awkward centres with questionable drivers, in poor locations,’ says Joe Magrath, director of development for China at retail property investment company TIAA Henderson Real Estate. ‘These will fall by the wayside in due course.’

TIAA Henderson is behind the development of the Florentia Shanghai outlet village, which opened near Yuandong Avenue metro station on Line 2 in Pudong last month. MaGrath believes that outlet malls are proving increasingly popular in China because more sophisticated shoppers are looking for reduced prices on luxury brands and are happy to travel out of town to find them.

‘The situation is much better in Shanghai than in other cities,’ says Hsiang-Yun Chu, senior director of retail services at CBRE. ‘Shanghai is a city that attracts people from all over the world, and all over China, for the shopping. There are people here with disposable income, and we think there is potential here for shopping centre developers. In the long-term, we see potential.’

"Shopping-mall-crop"
And it’s clear that the city’s demand for retail remains strong. The IAPM mall on Huaihai Lu has only been open for just over a year, but is forecasting more than 36 million visitors in 2015. Maureen Fung, general manager for leasing at IAPM developer Sun Hung Kai Properties, says a key part of their success is offering longer hours (the mall is open until 11pm for shops and midnight for dinner and drinks) and a range of entertainment, including an IMAX cinema.

Fung believes the city is still full of opportunities for retailers, but warns that ‘unique positioning, trade-mix and exclusive shopping experience are the key points to attract and retain shoppers.’ In the case of IAPM, around 10 percent of stores are appearing in China for the first time and 15 percent making their debut in Shanghai.

‘Tenants will prove to be more critical and demanding in their centre choices going forward,’ agrees Magrath. ‘And developers will be pushed to be more creative in their products, and cutting edge in their designs.’

Most agree that as mall expansion shows no signs of slowing in the city, it’s actually Shanghai’s more traditional shopping areas that will suffer. ‘Some of the main shopping streets in the city are getting so run down now, and you see many empty shops. I think that is more of a risk for the city’s retail than the supply of shopping centres,’ says Chu.

Holding events is one way mall operators have been working to make their properties stand out. K11 has an in-house team to prepare the gallery aspect of its ‘art-mall’. Last year’s recent Monet exhibition drew enormous crowds, although views differ over whether it actually brought in extra money for the mall’s shops. Similar events have included a 25-year retrospective of photography from Elle China at the Jingan Kerry Centre, an exhibition of works by the conceptual artist Xu Zhen last year at luxury brand LVMH’s L’Avenue, and an exhibition opening for David LaChapelle’s photographs of the new line of Tod’s handbags at the IAPM.

Others are striving to create loyalty to their particular mall. Examples of this include use of social media – IAPM has introduced a loyalty programme called VIC and gathered over 1.7 million Weibo followers.

Some property experts remain sceptical about these measures however. ‘Sometimes I start to wonder, are you building a shopping centre or some kind of an indoor theme park?’ says Chu. ‘I think some common sense needs to prevail, and developers need to stop and ask themselves; what do people actually want?’

"Yi-Ou-Lai-1-crop"

‘If you have a good centre, you do these things, then it helps,’ says Siu Wing Chu, head of retail at property agency Savills. ‘If you have a bad centre, you do that, it still doesn’t help. The principle things have to be right. A shopping centre is somewhere you encourage people to come and visit regularly. Most important is not getting people to come and see you one time, but regularly. There are many malls in Shanghai where there just shouldn’t be any shopping malls; wrong design, wrong location, no metro, in the middle of nowhere.’

The city’s shopping scene looks set for many changes in the year ahead. Experts agree that as more shopping malls open in the city, the weaker will struggle to stay afloat, facing rising vacancy levels and falling footfall. ‘A lot of shopping malls here, particularly in certain areas, do look like museums,’ says CBRE’s Chu.

And if shopping malls have to close, what then? Ideas such as the laying of a football pitch on the roof of a shopping mall in Jinhua, Zhejiang province, seem unlikely to catch on in Shanghai. And with their lack of windows and expansive, low-rise designs, malls are very difficult to transform easily.

‘I think there will be a lot of problems,’ says Siu Wing Chu. ‘The funny thing is that you can always change a tower of offices, into a hotel or even apartments. But a shopping centre – you can’t do anything else with it. There’s only a certain amount that you can absorb in a city at a time. I think China is seeing a phenomenon that nobody in the world has ever seen before; nobody has ever seen so much supply before. And so nobody knows what to do about it. It’s only just starting.’

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