Chinese Malls Waive Rents Due to Soaring Vacancies

I was writing about the ultimate pain coming to China’s crony, liquidity fueled, ponzi economy way before it was cool.  In fact, all the way back in 2009 when I was still working on Wall Street I wrote a piece for clients titled “The Emerging China Risk.”  Last year, I highlighted some of the country’s fraudulent “wealth products” in the post: China to Boost the Global Economy? Nope it’s also a Total Ponzi.  Well now we see that the overbuilding of ghost malls in the middle of nowhere is finally coming home to roost.  We learn from Bloomberg that:

Chinese landlords are forgoing rent and paying to outfit stores for mass-market fashion brands including Zara and H&M, a bid to blunt the impact of a boom in shopping-mall construction that threatens to push up vacancies.

Chinese developers built more malls and expanded into smaller cities as consumer spending and incomes grew, elevating China’s economy to the largest in the world after the U.S.

Half of the 32 million square meters (344 million square feet) of shopping centers under construction around the world are in China, according to CBRE Group Inc. (CBG) About 21 million square meters of retail space is expected to be completed by next year, a 38 percent increase in supply, according to broker Cushman, which tracks 20 cities in China.

Vacancy rates in some less affluent cities could surge to more than 30 percent by next year from as low as 6.8 percent in the first quarter this year, Cushman forecasts.

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