For a period of time, it seemed China was trying to erase its physical history. The campaign against the "Four Olds" in the 1960s resulted in the destruction of countless irreplaceable artefacts. However, while the ensuing Reform and Opening Movement did counter revolutionary excesses, it did not extend its protection to architecture.

Seeking to project modernity – and to improve dilapidated neighbourhoods cheaply and quickly – municipal governments and real estate developers enthusiastically razed traditional neighbourhoods and replaced them with new construction of variable quality.

This may be changing. In recent years, some Chinese municipal governments and developers have set aside the wrecking ball. Instead, they are refurbishing, redeveloping and reinventing old neighbourhoods, empty warehouses and abandoned factories for profit. If this is a trend, as opposed to a fad, it represents an important development in Chinese urban planning.

Factory Shanghai, for example, a recently opened integrated artistic and marketing space north of Shanghai’s city center, looks completely contemporary: all glass, steel and burnished wood. One would never guess by looking at it that it used to be part of a slaughterhouse complex. But Paul Liu, a Shanghai developer and chairman of Axon Concepts, cooperated with the district government to renovate the area. "They found me," he says. "They knew my Three on the Bund [another historical renovation project in Shanghai] was successfully renovated and successfully luxuriated, and they invited me over. It was love at first sight."

Together they took the decrepit – though architecturally curious – building and converted it into a hip cluster of retail, offices, restaurants and bars, named "1933" for its original construction date.

In theory, refurbishing neighbourhoods with distinctive architecture – or upgrading abandoned factories and warehouses to "creative spaces" – should attract higher-paying tenants. When done well, the newly created spaces breathe life and money into the walls of old buildings and their surroundings. Li Fan, an urban planner at the National Research Center of Historic Cities at Shanghai Tongji University, points to Shanghai’s Xintiandi and Taikang Lu developments as examples of commercially successful and socially vibrant renovation projects. Others include Chengdu’s Kuan Xiangzi, and Beijing’s Nanluogu Xiang.

Tricky market

However, success is not guaranteed. As beautiful as 1933 is architecturally, its prospects remain murky for reasons unrelated to aesthetics.

Winky Yeung, director of retail services at CBRE Shanghai, says that turning architectural renovations into commercially successful developments is not easy. "The market is immature and tricky to predict," she says. Some locations become fabulously popular; others slowly fade into a melancholy state that seems no better off than before.

The reason is that local governments, private developers, architects and real estate agencies are plunging into a market which few of them understand thoroughly, she says. Municipalities and SOEs in particular lack experience in planning and managing such developments once they open.

Adding to the risk is the expense. Liu of Axon Concepts says that one deterrent is that it generally costs at least twice as much to renovate old buildings as building new ones.

In addition, there are political concerns. Li of Shanghai Tongji notes that even commercially successful neighbourhood renovations like Shanghai’s famous Xintiandi, can break up and relocate decades-old communities.

In addition to the expense of relocation, such displacements create political headaches for local governments and developers. Combined with the added expense, this may explain why some local governments prefer to erect ersatz Confucian Villages out in the suburbs where there is no one to displace.

Tenant selection is another particular management problem. 1933 carefully screens potential tenants for their suitability, but other sites are not so selective. Martin Kemble, a gallery owner in Shanghai, singles out Moganshan, a lightly renovated factory space in Shanghai that was originally intended to house an avant -garde artistic community, as an example. "They’re basically renting to anyone with money," he says, which allows both ground-breaking artists and "artists" who copy their work to rent in the same complex.

The indiscriminate acceptance of tenants can dilute brands of more innovative tenants and drive out lucrative big-name clients. "Good solid business people and solid brands get tired of dealing with shopping mall management," Kemble says. "It just seems really greedy, and tenants end up not trusting their landlords."

There are also the concerns of previously existing commercial tenants. While residents usually get some sort of reimbursement for being moved out, commercial renters usually do not. According to Joyce Wu, general manager of Dragon Town Hostel in Chengdu’s Kuang Xiangzi, the hostel has seen no uptick in revenues after renovation – in fact, her backpacker clients complained of having to walk down the alley instead of being dropped off at the front door – but rent fees went up.

On the other hand, Dominic Johnson-Hill, owner of Plastered T-shirts on Nanluogu Xiang, a renovated historic alley in Beijing, is quite positive about the effects of the renovation. His sales have gone up, he says, as have those of his neighbours, most of whom are small, quirky individually owned businesses.

The Antichrist

Historically renovated sites are attractive for investors because the distinctive architecture can be incorporated into a brand identity, says Silas Chiow, director of Skidmore, Owings & Merrill (SOM) Asia, the firm that developed Shanghai Xintiandi in collaboration with American architect Ben Wood. Shanghai Xintiandi is popular, he says, because high-end retailers and restaurants don’t really like renting generic mall space.

But there’s more to Xintiandi than architecture; the development had the additional advantage of a good location, in easy walking distance to public transportation and other tourist sites, all of which drove foot traffic to its tenants’ doors.

Converted factories like The Loft or Bridge 8 in Shanghai, on the other hand, have not managed to become "destinations" that attract the shoppers their tenants need. Gallery owner Kemble says he got calls from The Loft offering him space, but he refused it. "The Loft is not happening because the management doesn’t get marketing, brand placement, or foot traffic," he says. "There are no themes, no concepts, and no positioning."

CBRE’s Yeung says Bridge 8 is "just an old factory" which holds little interest to shoppers or tenants.

Even success stories are not without their critics. Xintiandi is often criticised as having become a "Disneyland", where corporate chains and hordes of tourists deduct from the authenticity. Axon’s Liu calls Xintiandi "the Antichrist". Shanghai Tongji’s Li, on the other hand, maintains a sense of humour about it: "Old people think it’s new, new people think its old, foreigners think it’s Chinese and the Chinese think it’s foreign," she laughs. Nevertheless, she says people love to go there to spend money, which makes the area lively.

The 1933 complex, therefore, has a challenge to overcome. No matter how trendy its tenant list – the location is home to Shanghai’s Ferrari Owners Club – whether its more upscale approach will be able to post similar results to "the antichrist" remains to be seen.

1933 is advertised as a mere five minutes from the Bund, but it’s still difficult to find. The neighbourhood is a maze of lower-end local family restaurants and convenience stores that won’t share customers with 1933. "A lot of value comes from location," says SOM’s Chiow. "1933 is a building by itself."

Small government

However, not every success story needs a master plan. There are neighbourhoods that have preserved their traditional architecture and become economically vibrant with a minimum of top-down direction. Neighbourhoods like Taikang Lu in Shanghai and Nanluogu Xiang in Beijing have become popular cultural and retail centres iwith little planning from the local government.

Johnson-Hill, of Plastered T-shirts on Nanluogu Xiang, says the area was already attracting a better class of tenants before the Dongcheng District municipal government noticed. When they did notice, they helped. A Dongcheng government spokesperson, in a statement to Eurobiz, says that the area was becoming full of "random shed construction" and was full of fire hazards.

"Merchants and residents had set up boards, doors and windows by themselves. Ancient walls were covered by cement. The hangers, colour and material outside their stores were inconsistent. The flavour of Nanluogu Xiang was fading due to the lack of well-organised overall landscape design," says the Dongcheng government.

Johnson-Hill applauds their efforts to upgrade the area. The government put in new plumbing systems, electric meters and heaters; repaved the road, restored the brick. Now the Dongcheng government regularly solicits his opinion on future projects, he says.

Why renovate?

Despite a growing interest from Chinese governmental bodies to support historical renovation, the attitude is far from universal. For example, a 19th century Carmelite convent in Shanghai underwent a "renovation" process that levelled the original buildings right off the bat.

Perhaps even more dramatically, the Kashgar municipal government in Xinjiang has recently announced plans to raze about three-quarters of the traditional old city centre, which has thousands of years of Silk Road history and hundreds of thousands of residents.

The architectural renovation movement in China is still in its infancy, with municipalities still learning to balance their political responsibilities, investors’ goals, and the expectations of tenants. But part of the debate runs deeper. What is the "value" of history? How should that value be expressed? "Historical renovation is not only about architecture and commerce," SOM’s Chiow says, "but also to preserve a piece of history that future generations can enjoy." This may be true, but does a corporate coffee chain in a hutong really help preserve history, and to what end?

BOX: Too creative

Designated "Creative Parks" are frequently even more creative tax loopholes

While historical renovation and similar architectural recovery projects may have certain themes in common, there are important differences.

The standard project is the "historical mall". Most of the "xintiandi" projects springing up around the country fall into this category. Such projects can include office space and residences, but their raison d’etre is retail. They rely, therefore, on high levels of foot traffic.

Other projects, however, fall into a class of development called "Creative Parks," a category designated by local governments. Perhaps inspired by Western creative types’ prediliction for austerity and brushed cement, municipalities have begun encouraging the reuse of space in abandoned buildings for "creative" studios.

Creative Parks have two advantages over historical malls. First, they require no resident relocations as the buildings are usually empty. Second, they allow greater room for architectural reinterpretation, which can usually be done more cheaply than in an historical neighborhood.

Unfortunately, many Creative Parks fail because they aren’t really creative. Local governments often grant tax incentives to tenants in Creative Parks, hoping to encourage "cutting-edge" firms and retailers to take up residency. However, the definition of "creative" is too flexible. "Almost 80 percent of these ‘Creative Parks’ are just malls," sniffs Paul Liu, a Shanghai property developer.