The theme-park-ification of China’s malls

January 18, 2016 / By  

China’s retail supply boom has left landlords looking for solutions on how to fill space and drive foot traffic. Warner Brown from our Shanghai research team recently surveyed Changsha – a city whose total retail space is expected to more than double between the end of 2014 and 2017.  While Changsha’s earliest modern malls like ID Mall and La Nova maintain a first-mover advantage, others have not had it so easy. One of the recent entrants, for example, has shown stress with its weakly-performing department store undergoing major repositioning. The pressure is felt even more strongly among new properties in less mature decentralised markets.

With the leasing environment made even more challenging as e-commerce eats into malls’ traditional fashion business, we have observed many properties in Changsha pursuing nearly identical strategies of catering to children and families.  Landlords have filled common areas with thousands of square metres of ‘playlands’, and have rushed to patch vacant spaces with English schools, jungle gyms, and kiosks selling imported (safe) baby formula. Now, as you walk around malls in Changsha you will see huge ball pits, plastic slides, and inflatable sand boxes full of toys. It is difficult to quantify just how much children’s-related tenants have expanded. Our standard surveys only look at permanent tenants, while many tenants catering to children are either temporary tenants or occupy public areas rather than traditional storefronts. One firm estimated the amount of space accounted for by children’s oriented tenants has more than quintupled since 2011, and we would tend to agree.

While the above examples show many landlords retrofitting existing properties to embrace children’s themes, other developers are baking the concept into projects from the beginning. New malls whose showrooms a few years ago proudly touted themselves as “luxury” or as generic copies of successful Wanda malls now are just as likely to position themselves as destinations for children and families seeking a day out.  As massive themed areas for children have become part of malls’ sales boilerplate, there has been limited discussion of whether they are building too much space targeted specifically at children.  While holidays like Children’s Day in June bring out thousands of families to keep play areas busy, JLL has observed many playlands empty and even shuttered on weekdays.  Can weekends provide enough business to keep them afloat?

Landlords thus far are more concerned with catching the trend than with oversupply. They are not acknowledging oversupply risk — they are acting tactically rather than strategically and doing what they have to do to lease up space. Some developers are going even further.  We have playfully wondered how long it would take for malls to embrace the trend and simply transform themselves into theme parks. In Changsha, local developer Betterlife Properties is betting the farm on this concept by building a theme park component into its new commercial mixed use development. Time will tell if the developer is making a bold play for a key demographic, or oversaturating the market for children’s entertainment.

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