If the most frequently asked question about retail property in China is “what is the effect of e-commerce”, the next might be “what is wrong with Shenyang?” Any pan-China city lineup inevitably shows Shenyang as an outlier among Tier II cities, with high vacancy and high space provision per capita. All signs indicate the city is oversupplied with shopping malls.

More than half of the shopping malls in Shenyang have vacancy over 20%. And these are not new properties – they have an average age of 2.5 years. Many have been slow to fill up their mall space, which often exceeds 200,000 sqm. They can seem inappropriately large – a result of land-use directives that required lots of commercial space. There are even cases of vacancy rising after opening, as some initial tenants fail and landlords are unable to secure replacements. Shenyang’s oldest shopping mall has had high vacancy from its second year onwards and it is now in its sixth year. Even a busy Metro connection and pedestrian street frontage do not guarantee success: newer mall spaces along Zhong Jie continue to struggle with high vacancy. Customers arriving by metro turn away from the mall and walk straight out into the pedestrian street.

Of the half of Shenyang malls which have high occupancy, branded properties dominate: Wanda, Hang Lung, China Resources MixC. All four of Shenyang’s Wanda properties are bustling with foot traffic, and Wanda arguably controls the retail markets in the south and west of the city. With multiple locations across China, Wanda malls are becoming household names not unlike Coca Cola and Nestle, and customers opt for known quantities over less familiar rivals.

Several of Shenyang’s quiet, vacant malls contrast with bustling department stores just across the street. While in other cities department stores have ceded ground to shopping malls, in Shenyang the format remains important, and consumers thus have been slower to embrace the abundant supply of newer properties, gravitating instead towards a few key players.

Underlying the woes of Shenyang’s malls is the fact that its mid-range consumer base needs to catch up to the supply of mid-range malls. There are of plenty of low-end consumers, and arguably there is strong spending power at the high-end, but the supply of mid-range, mainstream malls has grown faster than the number of customers available to fill them. The result has been a sharp division between winning and losing malls. Many malls were built a few years ahead of the demand, and retailers are slow to enter unproven centres.

Seeing that most of Shenyang’s malls are wholly owned, enclosed, and well built, we are optimistic that take-up will increase as the middle class grows in size. This gives Shenyang a brighter future than other markets with high vacancy, which are beleaguered with open-air strata-titled centres – a format that is rapidly fading into the dustbin of history. There is hope for shopping malls in Shenyang, and market vacancy will fall when consumer demand catches up with supply.

Subscribe

Login

Notify of

new follow-up comments new replies to my comments

Label

Name*

Email*

Website

Company

Δ

Label

Name*

Email*

Website

Δ

0 Comments

Inline Feedbacks

View all comments