With more than 7.5 million restaurants across China, the country already represents the largest food service market in the world, and that demand for dining is expected to continue to grow. Spending on dining by Chinese consumers is expected to expand by more than four percent in 2017, according to figures from Euromonitor International, and that number is more than double the rate of growth in the Asia Pacific region as a whole.
The growing spending power of all this Chinese eaters is already reshaping the country’s retail real estate market.
Profiting from China’s Dining Culture
“Chinese social life revolves around dining, and especially for city dwellers, this means sharing meals with friends and family at restaurants and cafes,” explained Ellen Wei, Head of Retail, Shanghai & China Landlord Representation Lead. Wei is also taking care of JLL’s newly established F&B consulting division in Shanghai.
The international property consultancy launched new F&B services in Shanghai recently, following the success of a similar service in Hong Kong. “Traditionally, mall operators have placed restaurants and other dining options in upper floor space, seeing them as less important tenants than the international fashions brands,” Ellen noted. However the ability of attractive dining outlets to pull traffic into the mall has some of the most innovative retail landlords rethinking their usual arrangements.
Benefits of Dining Tenants
A high-end shopping centre opened by one of the biggest US retail landlords in Korea features a famous noodle shop right at the entrance to the mall,” Ellen said. “This landlord has found that by showing off their fashionable customers enjoying a meal just near the mall entrance, they can entice more people to come in and explore the facility,” the veteran retail advisor noted.
With China’s crowded cities often restricting the leisure choices of urban residents, more consumers are turning to shopping centres for entertainment and social activities transforming the country’s malls into experiential consumption centres. This trend looks set to continue as the Chinese government emphasises the need to grow consumption as a driver of future economic growth.
A survey of Chinese consumers published by McKinsey last year found that 46 percent of Chinese consumers planned to spend more on food if their income increases, and 25 percent of the survey respondents said that they were likely to increase their entertainment spending as their disposable income grows.
By contrast, spending on luxury goods by Chinese consumers grew by only two percent in 2016, after falling the two previous years, according to figures from Bain & Co. And this shift from luxury products to experiences is causing more retail operators to look into how best to give Chinese shoppers the range and quality of dining options that they are looking for.
Range of Services
Developing the right mix of food and beverage outlets for a new shopping centre can start long before the developer breaks ground on a new project. “We find it’s best to study what already works and to take note of what doesn’t,” said JLL’s Ellen. “In our pre-opening consulting services, we study existing projects in the city that are targeting a similar demographic, and estimate the foot traffic and revenue being driven by different types of outlets.”
Ellen Wei heads a team of 20 people which includes consultants on tenant representation and landlord representation, as well as being able to draw on JLL’s more than 100 retail team members nationwide and expertise from a range of experts in Hong Kong, London and other regional centres.
In the last few months, Ellen’s team has been focusing on developing an F&B strategy for a 100,000 square metre shopping centre project being built by an international developer in Shanghai. “In putting together our recommendations on this project, we interviewed more than 100 potential tenants, as well as surveying mall visitors at 50 of shopping centres across the city,” Ellen said. “This research is a lot of work, but ultimately it is the only way we can give our clients the true picture on the ground.”
On the strength of that development advice, the mall’s owner has already committed to retaining Ellen’s team as leasing agents for the project. The company anticipates more such opportunities to serve clients in Shanghai, and plans to expand this new offering to more mainland cities. “Based on our experience in Hong Kong, the right F&B outlets has the potential to not only create a group of successful tenants, but to boost the appeal of the whole mall,” Ellen said.
This post is sponsored by JLL. For more information on international F&B expansion in China, download JLL’s white paper here.