For Designer Style, It's All Outlet - Value Retail News

next two to three years, only two have
so far been completed. How many of
the remaining will actually open “will be
decided by the retailers,” he said.
Huge and empty
Brad Stipe devoted most of his session,
“Fundamentals of Conceiving
and Developing an Outlet Project,” to
design. He stressed the importance of
aesthetics, the advantages of racetrack
configurations, and the importance of
signage and graphics that “can make or
break a project.”
From a design and land-use perspective,
he said, China presents real challenges,
particularly the high-density requirements.
The need to accommodate
high density calls for multi-level outlet
centers, a model that hasn’t worked in
the rest of the world.
“Most successful projects have always
been one or two levels, usually just one
level,” he said. Citing projects he had
worked on in Japan – which had similar
density issues – he said developers
managed to deal with them and still stay
within two levels.
Another issue for China is the penchant
for constructing more space than
necessary. Stipe said maintaining an image
of success at all times is critical, thus a
project’s size must be appropriate for the
market and tenant demand. By developing
in phases, the developer both minimizes
risk and maintains an image of success by
keeping occupancy rates high.”
Developers had lots of issues to think
about, he said. “The population centers
are much, much larger, income disparity
much greater, and retail saturation of
international and U.S. domestic brands
is limited to low. Brand awareness,
while higher in the first-tier cities, really
drops off precipitously as you get to the
third-tier cities.”
In the final analysis, Stipe said, China’s
outlet industry can achieve success by
“following proven methods now, and
evolving later.”
Partnerships in all
shapes and sizes
Trying to explain the root of China’s
sometimes odd partnerships, Jiang Jun,
CEO of Shanghai-based Zaihang Real
Estate Consulting, said central government
land policy had effectively pushed
small operators, residential developers,
Richard Hamilton, Taubman Asia’s VP-development, stressed the importance of
strong partnership when developing retail centers in China
manufacturers and other groups into the
same corner. Their common denominator
is this: Though they’re all aware of the
outlet phenomenon, they had little or no
background in retail
but they all owned
land or had access
to it in the suburbs.
And many of
them, she added,
were familiar with
planning issues and
Jiang Jun
maintained close
relationships with
local government, making them seasoned
partners in tasks such as securing
land plots and permits.
As Jiang put it, “What they’re missing,
and what they readily acknowledge, is retail
and outlet expertise, brand relationships,
leasing and management knowledge.”
Obviously they have much to learn,
and some outlet players appear keen to
fill the knowledge gap. European-based
outlet operator Fashion House, for
example, addressed just this group in an
ad in the Outlets Asia program, offering
consulting and franchise services
to “any independent developers with
suitable land plots, either with relevant
permits or the ability to secure planning
approvals, along with access to a construction
capability but without specialist
knowledge of the outlet market.”
That said, partnerships can sometimes
take strange turns. Richard Hamilton,
Taubman Asia’s VP development, offered
a foreign investor’s perspective on China
and spent a lot of time on the topic of
partnership.
“In 2006, we were introduced to a
project opportunity in Macau for a mixeduse
casino resort. Besides the casino, the
project comprised four hotels, theater,
mall and convention facilities. It was a terrific
site,” Hamilton said, at the Macau end
of the Lotus Bridge to China, the region’s
biggest source of gaming tourism.
“The existing partners looked to
Taubman to undertake the retail component,
some 60,000 m2,” he said. And
Taubman liked the odds, reckoning
the project would yield a net operating
income in excess of $80 million. So the
developer signed for 25 percent of the
retail component, as much as the partners
were prepared to cede.
“We started work in 2007 and inherited
this terrible plan that had parallel
malls, terrible site lines, no consideration
of vertical transport [a critical detail
since the mall was to be on an upper
level] and we got to work and came up
with a racetrack design,” Hamilton said.
“What we quickly discovered working
with our partners was that they were
quite dysfunctional. There was a local
landowner along with two foreign fund
managers who were unaligned in terms
of their interests. Very quickly the project
stalled.”
Decisions couldn’t be made and the
financing required to keep the project
(continued on page 28)
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