Chinese developers pursue new strategies for empty office towers and

BEIJING — Chinese electric carmakers are splashing out on prime retail space and taking up storefronts at shopping malls — a new trend that offers relief for China’s commercial property developers who are still reeling from the shock of the coronavirus pandemic.

Electric vehicle makers in China want to attract the crowds of younger people who shop at malls, rather than opening standalone stores, said Ellen Wei, head of retail for property manager JLL China.

These companies can spend roughly twice per square meter compared with what a name-brand apparel chain might, Wei said, pointing to big budgets for next year and demand for premium ground-level space. In fact, one Chinese electric car brand plans to open 400 stores in 20 Chinese cities next year, she said, declining to name the client.

The confidence of electric automakers is increasing, Wei said, noting the brands are signing longer leases of one year, with the option to extend for another year. That’s up from just a 12-month term previously, she said.

After a prolonged slump in the auto market and concerns about the viability of electric vehicle start-ups, many of the automakers have seen deliveries surge in the last several months. In addition, start-ups Xpeng and Li Auto raised well over $1 billion each in their U.S. initial public offering this year, while Nio’s shares soared about 1,000% in 2020.

Some Chinese electric automakers have also tested the waters with pop-up stores.

“It’s effective because people still eventually want to have a physical location to see the car,” said Raymond Tsang, partner at Bain. “You probably don’t need a full-blown 4S dealership because there’s no service requirement. And you only need a physical touch to make your decision.”

Despite the demand from electric car companies, the vacancy rate for premium retail properties in Beijing was little changed at 8.7% in the third quarter, according to JLL. For the city’s Grade A office space, the vacancy rate was even higher at 13.9%, similar to the prior quarter, JLL said.

In an environment that was already challenging before the coronavirus pandemic, office towers are turning to partnerships and new leasing models.

Most major developers or landlords are trying out flexible office spaces, either on their own or partnering with co-sharing workspace operator WeWork China, acting CEO Michael Jiang told CNBC in a phone interview last month.

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