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CHINA’S FIRST LIFESTYLE CENTER TARGETS GROWING MIDDLE CLASS

By Curt Hazlett

Like lifestyle centers everywhere, Solana will be a mall turned inside out when it opens next year. What makes Solana different is its location. It’s in Beijing, one of the world’s most densely populated areas, a space-starved city far more suited to vertical development than to a 32-acre, open-air shopping center.

Solana is Beijing’s first lifestyle center, but its significance goes beyond that. Its designers say the center represents a new direction in China’s burgeoning retail development scene, a fusion of local and global retailing approaches they hope will make the new center a destination, not just a place to shop.

“Most developers in China place a huge emphasis on maximizing their plot ratio,” said Bryn Davies, executive director of retail services in Asia for CB Richard Ellis, which is acting as a management and retail consultant on the Solana project. “Solana is unique in that it’s low density. They’ve invested significantly in design and architecture and in creating ambience for the customer, and that’s very rare in China at the moment.”

If Beijing is a prime spot these days for new retail, Solana’s location qualifies as prime plus. The center is going up on the northwest corner of Chaoyang Park, the largest urban park in Asia, and occupies some 6,000 square feet of waterfront along Chaoyang Park Lake. The park lies four miles northeast of Tiananmen Square, next to the central business district. Nearby is the embassy district, assuring a steady supply of foreigners keen to shop. (According to Solana’s developers, 40 percent of the area’s affluent residents are from overseas.)

Adding to the site’s appeal is the city’s plan to turn the park into an entertainment mecca featuring the world’s tallest Ferris wheel. And the presence of the 2008 Olympics in Beijing certainly will not hurt foot traffic. “The consumer spending in the area is already very strong,” said Zhang Hong, executive director of Solana and a former IBM manager in both China and the U.S. “Even at midnight the restaurants are open. We have a model [of Solana] in our leasing center, and the feedback is very good. People say they have never seen this kind of center before.”

Solana is being developed by Beijing Blue Harbor Properties, a unit of Beijing-based China Glory Investments, which describes itself as a multinational conglomerate that “has received the attention and support of many state leaders.” Though it is unclear whether that means the government has a financial stake in China Glory, sources say it appears unlikely the company could have obtained rights to the location without state connections of some sort.

The site became available three years ago, and Zhang says construction is about 70 percent completed. The center is slated to open next summer.

Solana’s design, by U.S. architect firm The Jerde Partnership, includes a wide mix of tenants arranged along themed “streets,” among them Landmark Dining Street, Brand Avenue and High Street Loop. On the western edge there will be anchor stores and to the east a hotel. Leasable space will total about 1.6 million square feet (150,000 square meters). Water features designed by Fluidity Design Consultants, of Los Angeles, will play a big role in the center’s appearance, as will fanciful lighting designs by Kaplan Gehring McCarroll Architectural Lighting, also of Los Angeles.

With China going mad for luxury shopping, Solana could be expected to rely strongly on high-end goods, but Zhang says this is not the case. Though the developers hope to attract some luxury brands, such as Gucci, Zhang says having a mix of price points is more important. “The majority will be second-line brands,” she said. “This will attract more traffic.”

The basic approach will be to provide consumers both variety and a memorable shopping experience, says Chris LeTourneur, a partner at Thomas Consultants, a Vancouver, British Columbia-based global retail development strategy firm that worked on the project. “In North America we polarize to either the value price points or the experiential,” he said. “In Beijing it’s been traditionally about price and getting the best deal, but the emerging middle class is turning toward the experiential.” That meant the design had to pull together ideas from all over the world — Europe, India, North America and, of course, elsewhere in China, LeTourneur says.

“We tried to go beyond the traditional Chinese approach to retail, which is often many small shops inside one large vertical building,” LeTourneur said. “We wanted to introduce the lifestyle concept into China, but we also blended it with something that people there are more familiar with: a component of the indoor market street shops, where you have smaller local operators clustered together.”

Solana is designed to provide more dining and entertainment options than other centers in China, which typically devote up to 80 percent of their space to retail, Davies says. By contrast, retailers will occupy just 50 percent of Solana’s leasable space. “There are very few shopping centers that try to make customers feel truly comfortable,” he said. “They are perceived as functional developments whose main purpose is to provide rent to the landlord.”

So far “the reaction from tenants has been excellent, both from those already in the market and those that are in Asia but not necessarily in Beijing,” Davies said. “There’s been a positive attitude toward the low-rise design and the destination status of the project.”

But does good feeling translate into top rents? “We’re still in the early stages of leasing, so we aren’t able to disclose achieved rents at the moment,” he said. He did acknowledge that they “are not at the top end for Beijing, largely because it is a new project in an unproven location.”

Still, Solana is coming on stream in a landlords’ market. CB Richard Ellis says rents in Beijing for the first quarter rose 8.5 percent from a year earlier. Monthly rents for space in the city’s most established center, Oriental Plaza, increased from an average of about $11 per square foot to $13 per square foot ($120 per square meter to $145). Prime space in the center now rents for $300 per square meter, says Davies, “which in international terms is quite significant.” And “Beijing has always been seen as the poor cousin to Shanghai in terms of attractiveness, but now it’s really starting to hot up,” Davies said.

All of which is heartening to Zhang, who has traveled extensively to raise interest in Solana. “It’s been a lot of hard work, and it’s just the beginning,” she said. “After the opening, it’s important that we manage the center to make sure our tenants are satisfied. And we have to make sure the consumer is satisfied with our tenants.”

Whether Solana will spawn other lifestyle centers in China remains to be seen. “In cities like Beijing and Shanghai, it is very hard to find the right place for a lifestyle center,” said Zhang. “In our project we have open space. It is very hard to find a place that is surrounded by upper-class residential areas that also has a nice natural environment.”

In the end, Solana’s biggest impact might have less to do with its physical design than with its emphasis on shopping as an experience. “We want to provide the emerging middle class with a feeling of reward,” said LeTourneur. “We want them to have all the same experiences and products in Beijing that they see on television and on the Internet, and that includes brand merchandise and experiential shopping. It’s really where East meets West.”