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Shoptalk

Planning and Managing a Successful Shopping Centre

Undertaking rigorous consumer research and benchmarking tenant performance from the outset are just two ways to add value to a shopping centre development.

Spurred by rising domestic consumption, China’s retail markets are flourishing, particularly in regional cities. Developers seeking to build new shopping centres to satisfy diversifying consumer demand are faced with exciting new opportunities, but also tough challenges.

Before embarking on a retail centre development, it is worth asking the following questions. How can you create and sustain the best shopping experience for your tenants and customers? Will you consult with and treat your tenants and customers as business partners? Is there a competing shopping centre development planned or trading within your core catchment area? Can your business plan and management strategy evolve with China’s rapidly changing retail market?

Most likely, the responses to these questions will create further lines of enquiry. Engaging professional strategy planning and operational management advice from a team with experience of leasing and operating retail projects across China can help manage the competitive challenges ahead.

"An evolution is occurring with retail planning in China. New shopping centres are often integrated into large mixed-use developments that can occupy up to 400,000 sqm," says Colin Dowall, Head of Retail Asset Management for Jones Lang LaSalle Greater China. "The large financial and logistical commitment of these projects, plus the increasing scale of competition, has resulted in a greater level of financial benchmarking and scientific planning,"

Planning a shopping centre development can be subdivided into three component parts: pre-opening planning, project leasing, and retail asset management. These different functions are crucial for all retail developments, particularly in China, where retail strategy must be localized to meet unique customer and tenant requirements in each city location.

Retail Consultancy
Scrutinizing and refining the plan of the shopping centre site, evaluate the existing and future competitive projects, undertaking consumer survey and tenant research and identifying financial objectives and budgets are essential tasks. "At this stage, it is important to work closely with strategy and design consultants to rigorously critique the design plans and shopping centre layouts," says Ingrid Gong, Associate Director of Retail for Jones Lang LaSalle Shanghai.

For mixed-use projects, this phase should also address ways to develop, and manage, linkages and efficiencies of scale between the retail, residential, hotel and office parts of the development.

Agency and Leasing
The next step is to coordinate the marketing and promotion of the shopping centre, both to customers and potential tenants. Positioning the centre for the target catchment area and assessing the existing and future competition will help developers target and secure the anchor tenants. Once that is completed, the general leasing work will manage the leasing for the rest of the centre.

Clear positioning of marketing activities is important to ensure that the objectives of tenants and developers are aligned. "Many Chinese and international retail brands are expanding aggressively into regional markets, but their objectives in terms of location and retail space can vary considerably and these need to be taken into account," says Gong.

Retail Asset Management (RAM)
To optimize the long-term value of a retail asset, many developers require assistance in managing the nuances of shopping centre performance. "By the fourth quarter of 2012, we will be managing 15 shopping centres across China, mainly in tier 2 and tier 3 cities – as this is where most of the new retail centre investment is now focused," says Dowall.

Typically, the 3-5 year Asset Business Plan for a new shopping centre will include a one-year settling in period as the operational and management functions become fully tested. To assist with strategic planning, projections of the net operating profit for up to 5 years should be established. Monitoring of key performance indicators and carefully managing the tenant mix will contribute to tangible results in line with the financial model.

"Tenant performance benchmarking should be an ongoing process. This helps determine the need for tenant engineering in advance of leases expiring to ensure consistent high performance of retail spaces," says Dowall. "Community marketing and outreach programmes should also be stepped up to entrench the shopping centre brand."

Strategic planning and benchmarking provide the tools to develop for success, but not all retail centres meet their financial objectives. Seeking expert assistance at the right juncture can provide a safety net against failure and a guard against functional or financial obsolescence.

"Underperforming retail assets are becoming more prevalent, because the markets are more competitive," says Dowall. "Turning around performance requires a comprehensive audit to assess all the factors behind a shopping centre’s failure to meet its targets. A 3-5 year financial plan can then be designed to improve efficiencies and revenues."


Case Study: Garland Project, Guiyang
Garland Guiyang is a part of a mixed-use development comprising retail space, offices, a hotel and apartments. The retail portion totals 70,000 sqm (B2–7F). The project is scheduled to open in the fourth quarter of 2012, with tenants including Stellar International Cineplex (the first Imax Cinema in Guiyang), Bafei Grand Banquet (a restaurant with over 7,000 sqm) LensCrafters and the Yum! Group.

Client Objectives
The Hong Li Cheng Group was established in 1998 in Guizhou Province. One of Guizhou’s highest profile enterprises, it focuses on property development and a property sales agency.

Since 2010, after the "Shan Shui Qian Cheng" project, the Hong Li Cheng Group has responded to the government’s strategy of building a new central business district in Guiyang by developing the Garland Project.

Garland is a part of Peng Jia Wan and Wu Li Chong, which together combine 16.3 million sqm of New City reform space.

Retail Consulting
Jones Lang LaSalle provides retail consultancy, leasing, operations management and property management services to the Garland Project, which is positioning itself as Guiyang’s leading business centre.

From the outset, Jones Lang LaSalle’s Retail Asset Management (RAM) team worked with the Garland’s Project’s Leasing and Property Management team on the master planning of the Shopping Centre. This early collaboration proved fruitful, as the Garland Shopping Centre already boasts 60% tenant occupancy, with more than 30 tenants also in negotiations, even though it is still in the pre-opening phase.