Word: retailing
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Beijing's golden resources mall ought to be a shopper's paradise. Built on the city's outskirts in 2004, the Art Deco-style center boasts a staggering 6 million sq. ft. (560,000 sq m) of retail space, making it the world's second largest mall, 30% bigger than Minnesota's famed Mall of America, once the largest. Golden Resources accommodates more than 1,000 shops, dozens of restaurants, 230 escalators and an ice-skating rink. On its five floors, you can buy everything from fur coats to exercise equipment to pet supplies...
...Golden Resources' barren parquets are less the exception than the rule in China these days. Rampant overdevelopment of retail space and too-optimistic expectations about the spending power of the country's growing middle class have produced a plethora of gui gouwu zhongxin (ghost malls) in the nation's metropolises-megacenters like Golden Resources that are struggling to attract shops and consumers. Although retail sales throughout China have been growing at 12% a year and in 2006 totaled $800 billion, during China's recent construction boom far more retail space has been added than the market can absorb. More than...
...China, home of the Great Wall, is a crowded country where bigger is usually viewed as better, so it's no surprise that retail-property developers seem to be trying to outdo each other with giant construction projects. The mainland already hosts the world's largest shopping center, the 7 million sq. ft. (650,000 sq m) South China Mall in the southern manufacturing city of Dongguan. Like Golden Resources, South China Mall suffers from a dearth of stores and shoppers. Yet more megamalls are on the way. By 2010, China expects to be home to seven of the world...
...Western standards, Chinese consumers simply have not yet begun to spend. As a result, "less than a handful of these new [malls] will meet expectations," Parker says. "China's most important cities are literally littered with spaces that are dark and underperforming." Statistics detailing nationwide vacancy rates for retail centers are hard to find, but in the economic powerhouses of Beijing and Shanghai, rates hover around 8%, according to real estate firm Jones Lang LaSalle. That's twice as high as rates in the strongest U.S. markets; in Singapore, less than 2% of retail space lacks tenants...
...Moreover, the business model followed by many Chinese developers is geared for making a quick buck, not for long-term profits. In the West, many developers build, own and manage their malls. In China, retail projects are "condominium-ized." That means the developer builds the space and then sells off individual shops to retailers. Because this strategy offers almost instant profits for investors, builders have little incentive to pick tenants carefully-and no incentive to ensure the facility is properly managed for the long haul. "If there's any empty stall when it comes close to time to open...