Hung-over from the Olympian building spree, many of Beijing’s new malls, rushed into operation in the heady run-up to the games, are struggling to fill empty space with whatever tenants they can get their hands on. Increasingly, that means bars, restaurants and thrift stores.
Desperation is not universal. High-end malls continue to do well. For example, leasing staff at the sleek Shin Kong Place next to Beijing’s Da Wang Lu subway station, opened in 2007 by a Taiwan developer, said there’s a “long queue” for free space. But tenants at Shin Kong Place are invariably well-known luxury and consumer brands. The problem is at the low end.
On a recent Saturday at Solana, a sprawling, suburban-American-style mall near the new US embassy, shoppers jostled in the aisles – not to get into the brand-name shops here, but rather for the discount stalls set up in the center’s hallways, peddling tea mugs, pink quilt covers and jade curios.
A flea market may not be in keeping with the original high-end mission of Solana, but then eyebrows were raised last year when 3.3, a six-floor mall built in the brutalist style in the heart of the city’s diplomatic community, handed half its fourth floor over to China Doll, a nightclub, which did a brisk trade during the Olympics. Business has since slowed, however; the club has been closed since Christmas. It plans to reopen in April, according to a mall janitor who opened the door to reveal dusty bar tops and tables within. Most of the tailor shops sharing the floor with China Doll also appeared moth-balled, a film of gray dust forming on suits and qipaos.
Friends and enemies
There’s nothing unusual about bars in malls. Every mall earmarks about 30% of floor space for food and beverage (F&B) tenants, said Ada Nip‚ head of the North China retail practice at DTZ. That ratio could go up to 40% in tougher times, but no further, she said. Nip suggested that bars and restaurants have been less affected by the economic crisis and are therefore more willing to sign contracts than international clothing brands, which have become a lot more cautious about renting new space in Beijing.
Bars and malls are not always a good fit for each other. For one thing, bar crowds tend to show up after the stores close, so there’s not a lot of spillover. China Doll and the tailor shops surrounding it clearly did not drive business in each others’ direction. Nevertheless, some bars appear to be adapting well to mall space. The Babyface and SOS chains of nightclubs, for example, frequently rent space in shopping malls.
The Place on Dongdaqiao Lu in Beijing is a sprawling cluster of vaguely Venetian buildings oriented around a giant outdoor screen. Wedged in between a supermarket, a bookstore and a cake shop in the basement of is one of Beijing’s most talked-about bars, Song.
Song’s manager, Han Xu, said the bar has been a hit with 20-something local professionals – mostly women – who like the RMB58 mojitos. Xu credits, in part, the distinctive draw of the mall itself, in particular its giant TV screen.
Song management originally hoped The Place could serve as a counter foil to nearby Sanlitun, Beijing’s pre-eminent international bar street. But the draw of the old bar strip is a challenge. Song, Han admits, needs to work on its PR and try to get signposts on the roads pointing into the mall. Even if it succeeds, however, many bar patrons prefer windows that look out onto streets, not basement storefronts lit by weatherless fluorescent glare.
Mall managers, meanwhile, would prefer high-end fashion labels to watering holes.
“Fashion brands have a higher ability to pay than F&B tenants,” said Nip. Also, restaurants and bars usually demand a significant discount on rent – up to 50%, depending on the floor – largely because they rent more space than the average boutique, she explained.
Location, location
But Prada is unlikely to sign up for space in the basement or the nose-bleeds. Bars and restaurants are a good way to fill such spaces. Supermarkets also help. According to Nip, well-run malls like to secure a supermarket as an anchor tenant in the basement and pull a variety of dining and bar tenants in around it. With a traffic-generator like a supermarket, adjacent mall restaurants and bars can turn a profit.
The Ganges Indian restaurant chain does its best business at The Place, said a floor manager, noting that foot traffic regularly beats that at the chain’s other Beijing store at the Lido. “You really need a big supermarket nearby, that’s what generates the traffic,” he said.
Credited with a string of successful bar openings in Beijing, local impresario Glenn Phelan is now in the process of reopening an ailing sports bar in Sanlitun’s China View mall. He stands by the mantra that location is king.
“If it is off the beaten track, forget about it,” Phelan said, before pointing out the Lan Club, an ostentatious nightclub located in the LG Towers in Beijing. “It is only surviving due to the owner’s wealth. To reach it you have to walk through the mall, take an elevator, cross a gangway and do a U-turn. I have been on easier treasure hunts!”
Opening in the China View could be the biggest challenge of Phelan’s career. Of the 16 restaurants and bars that rented out space when China View opened in May 2008, only four have survived. “The answer is, struggling malls will need to find other alternatives, as it is obvious this method is failing,” he said.
Liu Xing Yang, the previous proprietor of the bar Phelan is taking over, intends to hold on to two bars in other malls but plans to steer clear of malls in the future because rents for the right locations are too high. “And you can’t buy the place,” he added.
