Longfor Properties opened its second shopping center in Shanghai on Saturday, boosting its portfolio of mainland malls to 26. The newly-opened Shanghai Baoshan Paradise Walk is a five-level shopping mall with a floor area of 140,000 square metres, and measures 40 percent larger by area than the retail element of HKRI Taikoo Hui developed by Swire and HKRI, which opened last month on the city’s West Nanjing Road.
While large in scale, the new mall is also a milestone in the changing face of China’s retail scene, as merchandise retailers now occupy just 52 percent of the center’s floor space.
More Fast Fashion for Shanghai’s Middle Class
As stated in a press release by the top 20 mainland developer, the project in northern Shanghai’s Baoshan district, is set to serve the 400,000 potential consumers living in the middle-class residential neighborhoods that now cover the former industrial zone.
That focus on middle-income Shanghai is reflected in the development’s retail mix which features fast fashion brand Uniqlo, Ralph Lauren’s Chaps, and the requisite Starbucks outlet.
Baoshan Welcomes Another Retail Behemoth
Longfor is promoting the new mall as serving growing demand from Baoshan’s rapidly gentrifying population, and Baoshan Paradise Walk also links directly to Shanghai’s Metro Line 7, making it easier for shoppers to stop by on their way to or from Jing An and Putuo districts to the south.
The neighborhood’s growth has also attracted other players, however, with Longfor competitor, Powerlong having launched a 270,000 square metre commercial mixed-use complex, which includes hotel, office and shopping centre, in Baoshan in October.
Services Now Take Up 48% of the Mall
The tenant mix reflects the rapidly changing realities of China’s shopping scene after China’s retail sales grew by just 10.4 percent in the first half of 2017 according to DBS Vickers — the slowest expansion since 2008.
To attract shoppers who may now be ordering their daily necessities on Taobao or JD.com, Longfor has lowered the ratio of merchandise retailers in its tenant mix, with food and beverages tenants taking up 31 percent of the mall, and merchandise sellers occupying just over half of the facility.
Another 17 percent of the new development is leased to early education brands and indoor theme parks with an entire level of Baoshan Paradise Walk dedicated to the pre-school and elementary set. This move comes as many retail developers turn to service providers as tenants in the face of flagging merchandise sales.
Going Experiential as Longfor Expands Retail Portfolio
The Baoshan project could be the shape of the future for Chongqing-based Longfor after the company controlled by billionaire Wu Yajun followed a similar strategy in China’s capital. Opened in 2014, Beijing Changying Paradise Walk also took the experiential retail track and featured facilities dedicated to children and a higher ratio of food and beverage businesses in the tenant mix.
The Paradise Walk brand has been popping up on more projects as Longfor expands into commercial developments from its original base in residential. The Shanghai project is the fourth new Paradise Walk for Longfor this year after it opened projects in Suzhou, Hangzhou and Chongqing. The Paradise Walk portfolio accounted for 87 percent of Longfor’s RMB 1.1 billion in total rental income in the first half of this year.
CPPIB Backing Helps Retail Expansion
The company aims to more than double rental income from commercial property to RMB 6 billion in 2020, according to chief executive Shao Mingxiao, and this year’s estimated rental income is RMB 2.5 billion.
That retail expansion has been funded at least in part by partnerships with Canada’s CPPIB, with Longfor saying it has six more malls in the pipeline in the coming two years. In 2015 CPPIB committed to investing RMB 1.25 billion in Longfor’s Suzhou Paradise Walk project and last year the Canadian fund manager earmarked another $680 million for Longfor mall projects in Dalian and Chongqing.