Building One New Mall a Year is Easy if You’re Real Estate’s Brad Pitt

Every city where Ronnie Chan’s Hang Lung Properties opens a new mall, there are at least 15-25 other shopping centres being built, according to his own estimates. But the chairman of the Hong Kong-listed developer of Shanghai’s Plaza 66 and other commercial centres in China says he’s not afraid of overcrowding in China’s mall market.

Chan has no concern over the overall market supply or the efforts of his mall building competitors because, according to the diminutive 65 year-old developer, “In the case of commercial real estate, I am Brad Pitt.”

While acknowledging that the Academy Award-winning actor and producer may have him beat for sex appeal, the Hong Kong tycoon made it clear that in what he called the “winner takes all” world of China commercial real estate, his company was going to be victorious no matter how fierce the competition gets.

Opening One New Centre a Year in the World’s Most Active Mall Market

According to some analysts’ statistics, more than half of the 39 million square metres of shopping centre space under construction across the world’s metropolitan centres is being built in China, but Chan told an audience of real estate industry professionals that Hang Lung is undeterred from adding to its already substantial stable of malls.

Speaking at the MIPIM property industry conference in Hong Kong last week Chan said that Hang Lung has averaged one new shopping centre per year in China over the last five years, adding the equivalent in area of one Empire State Building building per year to China’s supply of commercial real estate.

However, even in famously overbuilt markets such as Shenyang, where the company opened its 855,100 square metre Forum 66 project in 2012, the billionaire says that his company’s successful track record gives it movie star-like appeal with retail tenants and shoppers.

China Mall Oversupply Called Undeniable

While Chan is confident in the future of his own projects he predicted much rougher times for the majority of his competitors.

Speaking of mall developers in China the billionaire philanthropist said that, “For every winner, there’s going to be 10-15 losers,” and called the degree of unwanted space being built “quite severe.”

While the builder of some of China’s best known high end shopping centres saw room for some mid-level players, he said that China’s commercial real estate market “has a lot of living dead.” Chan predicted that there may soon come a time when the value of many of these malls will be less than that of the land they’re built on and suggested that the best path for many of the low end centres will be to tear them down and build something more useful.

Hang Lung’s Tianjin Mall May Test Chan’s Sex Appeal

For his own company’s projects, Chan indicated that Hang Lung’s Shenyang mall achieved an initial yield of 10 percent in its first year of operation. However, the opening of a more recent project – the Riverside 66 mall in Tianjin – could be a more severe test of the developer’s magnetism with retail brands.

The Hong Kong developer opened the Kohn Pedersen Fox designed 152,831 square metre mall in the Chinese second tier city in September this year, flying straight into the teeth of one of the country’s most overbuilt markets.

According to figures from CBRE, Tianjin brought online more than 640,000 square metres of new shopping centre space last year, more than any other city in China, aside from Chengdu. And the city of 7.5 million people has another 2.5 million square metres of shopping space on the way.

If Hang Lung can continue its 10 percent yields in the Tianjin mall market, then maybe Ronnie Chan can expect Brad Pitt to give him a call asking for pointers.