Forget Beijing: Mall owner Taubman likes second cities

U.S. mall-owner Taubman Centers Inc. is bypassing Beijing and Shanghai, instead building its first two Chinese shopping malls in the second-tier cities of Xian and Zhengzhou because the potential returns are higher, Asia President Rene Tremblay said.
Taubman is investing in cities where land costs are less than half those of the most prosperous tier-one cities, which have had an explosion in mall growth in the past decade, Tremblay said. There is more potential in smaller cities where a growing middle class is fueling sales of affordable luxury and fashion brands, he said.
“We knew that for tier one, prices were higher, competition was more fierce and we thought there were more opportunities in tier two,” Tremblay said in an interview in Hong Kong Tuesday.
Taubman looked at more than 100 cities across China, he said, before deciding on Zhengzhou, a city with a population of 9 million in the central province of Henan, and Xian with 8.5 million people and located in Shaanxi, a northwestern province.
In China, Taubman has jointly invested with both local developers as well as a local retailer, Beijing Wangfujing Department Store (Group) Co., rather than go it alone as it does in the U.S., where it is one of the largest owners and operators of shopping malls. Xian is to open in the first half of next year and Zhengzhou in the fall. Both will cost about USD385 million each, he said.
“When you are a foreigner, you have to team up with a local partner and local talent, they bring us things we didn’t have, and intimate knowledge of the consumer,” Tremblay said.
Tremblay said that Taubman is also managing a mall within Macau Studio City, a project developed by Melco Crown Entertainment Ltd. that will open on Oct. 27 with tenants including Yves Saint Laurent and Prada.
Bloomfield Hills, Michigan-based Taubman Centers was founded in 1950 by the late A. Alfred Taubman, who pioneered the development of regional malls in the U.S.. Frederik Balfour, AP