Several years ago, prime ground-floor spaces in major shopping malls across Beijing and Shanghai’s business districts were commonly occupied by electric vehicle (EV) showrooms, with staff often escorting customers to car parks for test drives.
Many of these stores have now closed amid sluggish EV sales – yet mall owners have not been left disappointed. Instead, a new retail landscape is emerging, filled with tenants who are proving to be even more effective at drawing crowds and boosting rental income.
The new demand for retail space comes from brands shaped by very different trends. They include toy giants like Pop Mart, sportswear labels such as Lululemon, and most recently robotics companies including Unitree Robotics, according to property consultants.
“From the landlord perspective, malls may also have become less eager to host EV showrooms than they were initially,” said James Macdonald, head of research for China at property consultant Savills. “As the sector has matured, many malls have placed greater emphasis on lifestyle, dining, entertainment and experiential retail formats that tend to drive more consistent consumer traffic.”
Tenant sales performance is crucial to landlords’ retail portfolios as it is closely correlated with rental income growth. Outperformance of tenant sales could drive positive rental reversions and higher occupancy, according to S&P Global Ratings.
“We believe the ability of mall operators to swiftly optimise tenant mix to cater to spender needs is key to protecting them from a rental drop,” said Edward Chan, a Greater China property analyst at S&P Global Ratings.
