What: Property developers in China are set to build 8 million square meters of retail space, a sign of long-term confidence in the currently troubled but increasingly competitive market.

Why it is important: Despite a property slump and low consumer sentiment in the mainland, a higher-than-usual volume of new retail space is set to launch this year.

Due to a regulatory tightening on mainland Chinese developers, Hong Kong firms are jumping on the opportunity to expand further into the mainland.

Hongkong Land, the developer behind the Landmark mall and other global brands, plans to invest USD 8 billion in a luxury retail mixed-use scheme in Shanghai. It also plans to build ten malls in six other cities across the mainland and two new mall concepts within the next five years.

China is heavily mall-based, with 78% of first stores opened by retailers being located in shopping centres. This means that relationships with mall landlords can make or break a brand’s business.

Around 8 million square meters of new retail space will launch in China this year, an increased number due to the delays caused by the pandemic.

Despite lower consumer sentiment, many businesses are confident that the mainland Chinese consumer growth story remains intact for the long-term and middle-class consumption is still set to rise.

Swire Properties will also invest HKD 50 billion (USD 6.4 billion) to grow its Taikoo Li and Taikoo Hui mall brands in tier-one and emerging tier-one cities and some mainland firms are in expansion mode despite the regulatory tightening on debt levels.

Hong Kong developers increasingly find themselves pitted against developers from Asian countries: Malaysia’s Kerry Properties and Singapore’s CapitaLand are two examples. Newer developers like Urban Revitalization Force, which is constructing half a dozen TX malls in the country, are taking a different approach by carving out a niche: youth culture and investing in local brands.

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