A BOOM in shopping mall development in China has created a glut in some areas and may lead to closures, a senior executive from Singapore-based Perennial Real Estate said Thursday.

Some malls were built regardless of local market demand and some are too big, Pua Seck Guan, executive chairman of Perennial Real Estate, said at an industry forum in Shanghai.

In recent years, local governments have been increasingly selling land parcels with requirements to include commercial space, leaving developers without a firm understanding of the market situation struggling with lower-than-expected returns, industry executives said.

Local governments competing with each other for stronger economic growth have propelled land sales and generated the boom in shopping mall development in the past five years, said Pua.

Some developers have been able to sell both residential and office units, but have struggled to find the right tenants for the retail portion of their mixed-use projects, said Pua.

What works for first-tier cities like Shanghai and Beijing won’t have the same success in lower-tier cities, he said.

There may only be one or two centers in smaller cities and many consumers there are in the middle or low-to-middle income groups, he said.

“I’ve seen a lot of malls with top brands at entrances that deter mass market residents from entering. They feel that they don’t belong to the place.” (SD-Agencies)