Pulse

New luxury project is a bad bet

(China Daily)
Updated: 2011-05-11 08:22

With tough competition, odds are stacked against the Topwin Center being a success

Just when we all thought Sanlitun's recent makeover was almost complete and the area was safe from further development, construction work has started on yet another high-rise tower and shopping mall. This latest new building activity is not surprising. Just as nature abhors a vacuum, present-day Beijing abhors an empty space, especially when it is prime real estate within the East Third Ring Road on Sanlitun South Street and Gongti.

I walk by this area every morning when going to Tuanjiehu subway station from my apartment behind Sanlitun SOHO. I'd wondered what would be done with it and recently began noticing large-scale excavation work. Last week it became clear crews were digging an underground parking garage for a new tower and upscale mall.

The wall enclosing this plot is now draped with banners heralding the Topwin Center, a 10- to 20-story tower with a high-end hotel and luxury townhouses. A low-slung three-story extension will serve as a shopping mall.

The new tower may lack the architectural panache of Sanlitun SOHO, whose silver-gray curved walls were the brainchild of Japanese "starchitect" Kengo Kuma; however, the Topwin's sleek shape and pentagonal exterior pattern is attractive enough.

That said, I wonder why any sane person would want to invest in this venture, as the last thing the area needs is yet more upscale malls, hotels and housing.

Let's start with hotels. Sanlitun may not be awash with luxury hotel accommodation, but it does have the Opposite House and the five-star Zhaolong Hotel. Both Swissotel and Asia Hotel are also nearby.

If the Topwin Center banners are anything to go by, its mall will house the usual high-end retail suspects, such as Esprit and Versace, along with fine foreign dining. Sanlitun's north and south villages are already filled with such options, however.

While most of the restaurants and bars in Sanlitun appear to be doing well, the same cannot be said for the famous brand-name stores. Although South Village has heavy pedestrian traffic, most people are there to window shop and dine, rather than buy. North Village is a ghost town much of the time.

This lack of business matters less to luxury retail chains like Zara and Vero Moda, which set up shop in Sanlitun not just to make money but also to claim a presence in such places. Now they have done the latter, however, why would they want to open more stores in the same area?

Even though it's been open for almost a year, much of the retail space in Topwin's neighboring SOHO remains unfilled, with pedestrian traffic in the complex even lighter than in Sanlitun North Village.

I talked about this to the owner of a new French restaurant in Sanlitun SOHO last month. She complained bitterly about being misled by the property management, who assured her and other tenants when they signed leases that the new complex would be filled with shops and restaurants and have lots of foot traffic.

The SOHO complex has significantly increased the supply of luxury within Sanlitun, yet with its sky-high purchase and leasing costs, many of the units are vacant. Moreover, another luxury apartment community just north of the Jingkelong supermarket that boasts "embassy-level housing" is also nearing completion, while Seasons Park and Central Park are 30 minutes or less by foot from Sanlitun.

The Topwin Center will only add to Sanlitun's surfeit of upscale shopping, high-end hotels and luxury housing. Yet, foreign demand for these things is being reduced by the slow but inexorable rise of the yuan, which is putting the squeeze even on fat expat compensation packages.

Perhaps with really good management and lots of luck, the Topwin Center might be a success. But with the deck stacked against it, the center is more likely to become Beijing's newest real estate white elephant.

The author is a corporate trainer at a State-owned enterprise. To comment, e-mail metrobeijing@chinadaily.com.cn. The views expressed here do not necessarily reflect those of METRO.

(China Daily 05/11/2011 page)