Theory of Shang Hai Commercial Real Estate Development Direction: New times of SM 2.5 —— Commercial Real Estate

2016-1-11

2016-01-11

Any business is the intermediate link with the service function of commodities circulation. Only when there is a consumer market, there exists the space reserved for retail. So the business development is inseparable from the development of the city rhythm.

Let’s review the change of Shanghai briefly. There finally has the subway (From the railway station to Jing Jiang Amusement Park) in 1995, there has been the subway inner ring. Shanghai's urban location and the service all service for China, later because of impetus of the rapid economic development, the urban floating population surge in reversely promoted the rapid expansion of the city. And the city had the outer ring and a number of subway lines. But when a national city developed to the outer ring, the city operation problem that contain capacity of 25-28 million populations has been placed in front of the city manager, including transportation, education, environment, comprehensive treatment and so on. Tokyo, the capital of Japan, with over 30 million population, is the only sample can be referred to, that’s why shanghai government issued lots of regulation to control the fast growing of population with 25 million as the maximum to avoid the risk perhaps, because we don’t have any experience and technic to face the challenge.

Let’s continuing the topic about the subway ring lines, the middle ring line was appeared later. The latest subway ring line exposed a problem the middle - class concern about, which is the group that can undertake the social driving force but easily be ignored by manager. In the central of capital, there were many buildings which have been torn down to build all kinds of government building projects and high-rise buildings. But the building that is been rebuilt only suitable for 5% of the high-income groups. When the real estate is used for accommodate the new – comers, they often choose low costs suburb land (Now from the Xu Jia Hui district to Min Hang direction, the other three directions are alike). When the population in the city has increased up to 20 million, no one has the experience on warning the government to manage the city because the city is facing the period when the economic development is most fierce and financial tax is the most high. So the delayed braking attribute the city built move to Old Min Hang, Song Jiang, Bao Shan Wu Song pier, Wai Gao Qiao, etc, and the population is rapidly expanding into 25 - 28 million. One-way path rush hour make a shock to the natural traffic bottleneck once again. The city life become ugly, agitated, depressed and low efficient, even worse than some small cities and rural areas.

No matter from the commercial accessories or from entering the commercial real estate area, the developer all set up all kinds of department stores or shopping center at the population gathering area to meet the business needs of localization caused by population average dispersion. But shopping center is to supply and complete the department, it only raises the overall grade of all kinds of street shop to one-stop consumption integrated store. In basically, it doesn’t produce radical changes to improve the whole quality of retail. Although some high – class public space look better than the shops located in the avenue, the merchant have to decorate the shop, the goods are the same, the service is only to cater for shopping center.

Along with the development of the era, the gap between per capita consumption has become bigger, education degree increased and public sight experience become more mature, today's Shanghai, accurately said since reform and opening up in 1978 to Jan. 2016 will enter a new era, because there has the SM2.5. Not PM2.5!

The middle – class gradually become a group, who has a lot of choices. The price and convenience is not the main part of their consumer conception. What replace it is:  Am I satisfied with it? Am I comfortable? whether I would like to do it? Although the price is a factor, it has become more flexible than 20 years ago. I think 15%-20% of people who live in Shanghai all live around the middle ring lines. This distribution is suburb of Shanghai where was originated from city 20 years ago, they live in the bottom of the society, but they moved to the middle ring lines by their own efforts over 20 years’ accumulation. 

SM2.5 specifically target at middle class, individual decoration style, goods, services, diversification, medium building volume (2-5 square meters). Higher dependence to rail transportation, with limited motor vehicle parking-lot, average food, characteristic catering shops lined, frequent bunk adjustment, marketing fashion, and so on. To cater for the needs of middle-class group who neither buy luxury goods at department stores nor buy public goods to shopping centers. If the department is 1.0, the shopping center is 2.0, so the new (Only for domestic) commercial form is positioned as 2.5.

Management features can be neighborhood center conception, can be outlets discount for selling point, can be a fashion metropolis or in other forms, these can have many samples to consumers, to provide consumer publicity and marketing effect. But the essence of all these are the same. They all cater for growing middle- class people who are 30 to 55 years old, have been in the mainstream consciousness and a growing middle-class.

This change applies to the geographical position is suitable for the old traditional commercial center but not suitable for old operation forms, and do not think that all department stores, shopping centers should crowd into here.

We have noticed that though there is a person who tries at first and be successful with correct orientation, site selection and right management, there are more of incorrect orientation, site selection and wrong management.. We shouldn’t comment on others who have put several million to rebuild. But the customers will vote by their true feelings, only in that time, the survivor on the market is the true early winner who has combined the theory with practice.

As a consulting firm, we specialized in retail, commercial real estate planning and investment direction, if we lost all these sensitivities, we’d better go home. I hope the team members who had read the article can give themselves a warning: Never waste your life because the time will not push you into the middle-class. On the contrary, if we can’t control ourselves, we’ll leave regret for our life.

I hope the person who has the opportunity to read this article is willing to give the chance for us to perform ourselves. I have participated in and promote the establishment of the first batch of foreign companies’ expansion in China, I believe I can also have experience to participate in the city changes and perform my social responsibility.

PIONEER is not only the company name!

Writer: Louis WU