Dept of Real Estate and Construction Management Master of Science Thesis no. 70 Div of Building and Real Estate Economics Shopping center development in China - Current situation, challenges and solutions Author: Supervisor: Liangping Wang Abukar Warsame Shanghai 2011 Master of Science thesis Title: Shopping center development in China - Current situation, challenges and solutions Authors Liangping Wang Department Department of Real Estate and Construction Management Division of Building and Real Estate Economics Master Thesis number No.70 Supervisor Abukar Warsame Keywords Shopping center, development, China, developed countries, problems, solution Abstract In recent years, shopping center becomes a more and more hot discussed topic in China due to its rapid development crossing China. The new retail format has brought both new opportunities and challenges. By comparing to western developed countries and region, China has not been involving the shopping center development for quite long time, the industry of shopping center development in China is more behind in terms of shopping center concpet development, design of a shopping center, investment model and the sysmatic professional way of shopping center development. How to lower the risks of shopping center development and have it to be a sustainable industry becomes a very crucial question to answer now. The paper will discuss those questions through literature review, interview, case study and comparison analysis. After all the research done in the paper, we can draw a few improving suggestions such as the government needs to have good commercial planning from the beginning, the developers shall have a healthy long term business model to support to have good shopping centers both for tenants and customers. Besides those, the developers should think about and use a professional way to do the shopping center development in China. The improving suggestion will need to focus on the customer needs and have long term business model. 2 Acknowledgement I would like to take this opportunity to express my sincere gratitude and thanks to my supervisor Abukar Warsame, for your great support, ideas and interest in my thesis. You gave me inspiration and guidance when I needed it the most. Your opinions have through this thesis always meant much for me. Thank you very much again for the past two years’ continued encouragement, Abukar. I would like to thank my parents because of their support I got the very dear opportunity to study at KTH in Sweden. Moreover I would like to thank my company Inter IKEA Center China for giving me extensive materials for reviewing, which definitely help a lot on my paper writing. During the past two years, I have learnt a lot shopping center knowledge from my company and all those have made me finish my thesis possible. Shanghai, 2011-03-26 Liangping Wang 3 Table of Contents Master of Science thesis....................................................................................................................2 Abstract.............................................................................................................................................2 Acknowledgement ............................................................................................................................3 1 Introduction...............................................................................................................................6 1.1 Background ...................................................................................................................6 1.2 Objective .......................................................................................................................8 1.3 Methodology .................................................................................................................8 1.3.1 Literature review....................................................................................................9 1.3.2 Interview................................................................................................................9 1.3.3 Case study..............................................................................................................9 1.3.4 Comparison analysis..............................................................................................9 1.4 Limitations ..................................................................................................................10 1.5 Organization................................................................................................................10 2 Literature review.....................................................................................................................12 2.1 Shopping center overview...........................................................................................12 2.1.1 Shopping center definition and classification......................................................12 2.1.2 Main attributes of shopping center ......................................................................17 2.1.3 Retail’s role in society .........................................................................................19 2.2 Theories of shopping center development ..................................................................20 2.2.1 Reilly's Law of Retail Gravitation and Central place theory ...............................20 2.2.2 Congener Conglomeration and External Demand Effect.....................................22 2.3 Retrospection of shopping center development in China............................................23 2.3.1 1980s – The precursors to the shopping center in China .....................................23 2.3.2 1990s - The first generation of fully fledged shopping centers ...........................24 2.3.3 21st Century - The latest stage of Chinese shopping center development............25 3 The importance of shopping center development ...................................................................26 3.1 Economic perspective.................................................................................................26 3.2 Social perspective .......................................................................................................27 3.3 Urbanism perspective..................................................................................................28 3.4 Environmental perspective..........................................................................................29 4 Shopping center development in developed countries and region ..........................................31 4.1 Three types of shopping center development..............................................................31 4.2 Shopping center development in U.S.A......................................................................33 4.2.1 U.S.A shopping center overview .........................................................................33 4.2.2 Summary of U.S.A shopping center development...............................................34 4.3 Shopping center development in Europe ....................................................................35 4.4 Shopping center development in Hong Kong .............................................................38 4.4.1 Hong Kong macro overview................................................................................38 4.4.2 Hong Kong shopping center overview ................................................................39 4.4.3 Summary of Hong Kong shopping center development......................................41 5 Shopping center development in China ..................................................................................43 4 5.1 China macro overview ................................................................................................43 5.2 Shopping center development in Shanghai .................................................................44 5.2.1 Shanghai macro overview....................................................................................44 5.2.2 Shanghai shopping center overview ....................................................................46 5.2.3 Summary of Shanghai shopping center development..........................................48 5.3 Shopping center development in Beijing ....................................................................49 5.3.1 Beijing macro overview.......................................................................................49 5.3.2 Beijing shopping center overview .......................................................................50 5.3.3 Summary of Beijing shopping center development.............................................52 5.4 Trends of shopping center development in China.......................................................53 5.4.1 Continue to grow and boom.................................................................................53 5.4.2 More international competition ...........................................................................53 5.5 Problems of shopping center development in China...................................................54 5.5.1 Weak concept defining.........................................................................................55 5.5.2 Poor dimensioning...............................................................................................56 5.5.3 Weak design.........................................................................................................57 5.5.4 “Quick