Hutong to Mall Migration
Beijing’s Evolving Restaurant Landscape
Beijing – the sprawling capital of contrasts and change. Over the past decade, Beijing’s entertainment precincts flourished, spurred on by the city’s rapid economic growth and targeted investment. The historic hutong districts around the Forbidden City have been a good example of Beijing’s developing restaurant and bar scene – offering a range of international, provincial and local concepts. However, recently these antiquated precincts have been forcefully redeveloped, with strong messages sent to restaurateurs to shift focus to newly developed shopping malls spread across the capital’s neighborhoods. Similar demolition strategies have been employed along Sanlitun’s once notorious bar street. This swift shift in urban planning has impacted Beijing’s hutong and dining communities, yet is there a silver lining? What are the benefits behind the mall migration and what can F&B stakeholders gain from the clear push towards higher density, outer lying community dining? Hatchery investigates.
Hutongs certainly have (had) their charm for budding restaurateurs. Summers spent bicycling to catch friends at a secluded restaurant or noodle house down a historic hutong alley registers fondly with many Beijingers. TRB Group, Susu, Mao Mao Chong, Dali Courtyard, 4 Corners, The Georg, Great Leap Brewery, Zhang Mama and many other leading hospitality operators all started in the hutongs, with many still operating there today alongside traditional doujiang youtiao and jianbing breakfast joints. Hatchery’s own culinary incubator is located in the Dongsi hutong. Restaurateurs could once take advantage of affordable rents for convenient hutong locations, content to put up with dodgy plumbing and extra heating bills in winter as long as customer foot flow was steady. In 2015-16 the cost of the hutong success became evident. Skyrocketing rents represented excessive demand for hutong living from wealthy Beijingers, boutique hotel operators and start-ups with deep pocketed investors. Whilst some from the state-subsidised days held on, the first half of 2017 was the final straw for many – with institutions like microbrewery Slow Boat, BBC and cult-cocktail bar Tiki Bungalow being forced to close.h text here.
For those remaining in the hutongs today, rent is a lot more expensive with required revenues to break-even harder to achieve. Individual bars and hole in the walls are looking for cheaper, denser pastures – and increasingly find themselves wooed by a shopping mall developer. The perception of shopping malls differs all over the world, and while China’s western counterparts may see dining in shopping malls as a convenience-driven experience, malls over Asia have established themselves as entertainment and lifestyle hubs. Swire’s TaiKooLi, Nali Patio and the Topwin centre in Sanlitun are testament of this – Beijing destinations to experience and be seen. With major financial hubs such as Hong Kong and Singapore leading the way for mall-centric dining, China is fast adapting to this trend. In Beijing alone, major new developments such as Parkview Green, Indigo, China World Mall and Hong Kong Land’s WF Central are coming to fruition with both private and public sectors positioned to benefit greatly. IKEA is even rolling out its own IKEA+mall strategy. These malls are especially relevant in Beijing, where extreme weather (both winter and summer) and pollution often influences consumer and dining out behaviour. Malls are able to mitigate some of these extremes, by remaining comfortable all year long and monitoring water, air and temperature levels.
Shopping malls are also increasingly valuable restaurateur options given their strategic locations. The premium malls are generally integrated above public transport hubs (subway, busing, and parking) and neighbor concentrations of office and residential buildings. This helps secure breakfast, lunch, afternoon and evening foot flow. The luxury mall models are giving way to F&B and experience-centered malls that go a long way to entice the millennial consumer off their cellphone and to balance the online Tmall shopping account with firsthand dedicated, unique experiences. Parkview Green’s changing art collection available to visitors nearby its floors of restaurants is a clear example of this shift. Restaurateurs can benefit from mall developers’ increasing focus on F&B experiences, and revenue shares, by asking for longer lease terms, supportive startup and fit out terms, and sometimes reduced rental agreements (on par with midrange fashion retailers) which helps with business longevity, location cash flow and marketing re-investment.
Along with the reinvention of the mid-high shopping mall experience for food concepts, restaurateurs and entrepreneurs are also looking at co-working and co-living platforms for partnership and growth. Innovation within the industry is leading to new office platforms like WeWork, UrWork, Naked Hub and lifestyle models such as 5Lmeet, who have recently taken over Traders Hotel in Guomao CBD. These models aim to shake up China’s property status quo based on shared-economy dynamics. Even hotels are embracing the revolution, where CHAO and Hotel Jen are clearly positioning themselves for pop-ups and thought leadership events, following in Swire’s footsteps with Opposite House and East.
In terms of restaurant groups that have embraced the move to open air and closed shopping malls, western concepts Migas and Moka Bros stand out, along with Din Tai Fung, and Ice Monster. Even Mystic South Yunnan Ethnic Cuisine, a Sequioa-funded Yunnanese food chain, is growing rapidly through clearly differentiated mall value propositions. These charging groups are great examples to smaller entrepreneurs of the upside potential in developing a cohesive mall strategy, where working with culinary incubators like Hatchery to validate concepts before reaching out to JLL, Swire and property partners to secure a location helps mitigate traditional risks associated with going straight into a hutong. Whilst the charm of the hutongs may be forever lost on some within a new-gen mall development, cutting-edge food concepts and entrepreneurial restaurateurs now have a home to cater to Beijing’s millennial consumers seeking new, fresh flavours and cuisines. This transition from old to new should be seen as an opportunity for food ideas to grow in the capital - after all, change in this community is the only constant.
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