Each year, investors, analysts and consultants devote considerable energy in researching which cities in the region are most favourable for real estate investment. Industry think tanks rank dozens of urban centres for their investment potential and top property consultancies produce reports on which communities have the highest GDP, the biggest consumption of luxury goods, and the youngest populations.
However, Kardan Land, which amongst other projects, developed the successful Galleria Chengdu shopping centre, in what many studies have pointed to as among China’s most oversupplied retail real estate markets, believes that investors focused on city-level comparisons may overlook some of China’s most promising neighbourhoods for property investment.
Choosing a Neighbourhood as Much as a City
“While we looked at macro-level data on the city’s economy when starting to develop Galleria Chengdu, in choosing our project location it was more important to us to get to know the district and the people living in the neighbourhood, before deciding to go ahead with the development,” said Walter Van Damme, CEO of Kardan Land, speaking of the company’s decision a decade ago to develop a shopping centre in what was then considered by many to be a far-flung provincial capital.
Kardan Land opened the 53,619 square metre (577,150 square foot) Galleria Chengdu project in 2010, and later sold a 50 percent stake in the project to a fund managed by MGPA (now part of BlackRock) in 2011, before selling the entirety of the project to a BlackRock fund in 2014. BlackRock later sold the shopping centre to CapitaLand Retail China Trust (CRCT) in 2016 with the six-storey mall still at 100 percent occupancy.
For Kardan, whose track record includes developing and operating more than 130 commercial & residential projects, including some of new Europe’s most successful retail and office projects, gaining neighbourhood-level knowledge was key to building a shopping centre that would attract visitors over the long haul.
“A successful mall has to work as part of the local community. The design of the mall, the brand mix and the marketing all have to be in tune with the people that live in the vicinity if you want to win over hearts and minds,” Van Damme pointed out. This approach paid off for the Galleria Chengdu, which was fully occupied well before 2014, when Kardan Land exited the project.
Big Data and Ground Level Research
Kardan Land’s team looked at economic data for Chengdu before deciding to invest, but took a more in-depth approach to its due diligence before taking on its first retail project in the city.
“Our team has done successful retail projects in Eastern Europe, so we had learned some lessons there about how each neighbourhood has different needs,” Van Damme said. “Also, we have done five larger scale residential projects in China, so from understanding what kind of homes people want, we gained some insight into Chinese neighbourhoods, and this helped our team to understand how people shopped.”
Getting to know the Galleria’s neighbourhood in Chengdu’s Gao Xin district meant sending teams to the city, which is the capital of southwest China’s Sichuan province. “We already had a team in Beijing and had done projects in Xi’an, Shenyang and Changzhou, but that didn’t mean we were Chengdu experts,” Van Damme explained. To get to know the city, the developer’s team made multiple visits to the fast-growing provincial capital, to walk the streets of their mall’s future home, meet face to face with government decision-makers, and measure how well the existing retail options met the needs of local citizens.
Learning From Sichuan Success
Armed with the knowledge gained from their Chengdu experience, Kardan Land’s team has now turned its focus to applying its insights in more mainland cities. The Beijing-based company opened the Europark Dalian shopping centre in 2015 and has plans to open more mixed-use projects, combining residential and retail, in the years to come.
“What we’ve found is that, once you get beyond the headlines about ecommerce, Chinese people still like to shop,” Van Damme said. “If a developer takes the time to understand the needs of the local community, and focuses on delivering the right product, then shopping centres can be a strong investment in China’s emerging cities.”
The developer’s profitable retail projects have led to demand from other builders to manage shopping centres, creating a new retail asset management business line for Kardan Land as it expands into more Chinese cities. With projects already completed in six mainland cities, the developer is also looking to build a portfolio of investment grade retail focused projects in Tier I and Tier II cities, either through redevelopment of existing assets, including under performing or non-performing centres,, finishing projects that are under development or through greenfield developments.
Kardan Land’s China Commercial Projects
This sponsored feature was contributed by Kardan Land. To learn more about Kardan Land and its projects, please visit www.kardanland.com.