China: A Nation Without Shopping Centers

Ivanhoe Cambridge sees great opportunity in China because it is still relatively under-retailed relative to the western world. The firm estimates that there are only about 1,000 shopping centers in the whole of the country and, of those, only about 400 are considered close to international standards. Richard Vogel, senior vice-president of Ivanhoe Cambridge China said estimates based on population and consumption trends mean that the country could over time support 10,000 to 15,000 centers.

In Changsha, the south-central province about an hour-and-a-half flying time from Shanghai, the La Nova development is the only shopping center of its kind in the “second-tier” city of 6.6 million. “In Changsha, here was no shopping center, period,” said Vogel. “The traditional retail that you would see in second-tier cities are department store formats and individually owned shops in clusters of retail buildings.”

While developers may think of China as riskier than many other developing markets, Vogel sees the situation differently. “We tend to look at China as opportunistic in the view that it is a very fast growing economy and the markets are developing quickly. That is the main risk that we deal with every day.”

He ranks that speed of development risk, ahead of any political risk, that goes with the country’s one-party state. “There is actually quite a lot of stability because the Communist party obviously is very solid, well in place and able to control the economy and infrastructure development which we think is a very big positive for China.”

The other big risk for a foreign developer, Vogel said, is construction quality. Contractors do not generally work towards first-world quality standards which has necessitated Ivanhoe Cambridge taking a “hands on” approach to development. “We have a full team that is involved daily in all the decision making and strategy and through that we are able to achieve the same quality of facility that we get in North America which is really our competitive advantage over here.”

Ivanhoe Cambridge employs 47 people in Shanghai working on everything from real estate investment, development, leasing and operations and legal counsel. “We have a full assortment of professionals that work here to make sure we can manage risk in all areas,” he said.

The Canadian developer sees four strategies or development models for China, ranked in descending order of availability or likelihood:

1. Greenfield development. “That provides the greatest opportunity because you are able to be involved in the site selection as well as the design, development and merchandising of the site from the very beginning,” said Vogel. “That is where we think we can create the greatest value.”

2. Mixed used model. Another developer may have already started a mixed used project that includes a shopping center. Ivanhoe Cambridge would work on development of the site and take over ownership of the mall on completion.

3. The La Nova model. Buy a stake in an existing property under development where the Canadian firm can add expertise to the re-merchandising process.

4. Buy an existing shopping center that is running well and just operate it.


Ann launched RENX in 2001 as a part-time venture and has grown the publication to become a primary source of online news for the Canadian real estate industry. Prior to…

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Ann launched RENX in 2001 as a part-time venture and has grown the publication to become a primary source of online news for the Canadian real estate industry. Prior to…

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