Taipei Times: What Taipei 101 Mall tenants have already signed on the dotted line and what big names do you have under your belt?
Simon Van de Velde: Taipei 101 will house 161 shops when complete. As of last Friday we have signed contracts with 142 fashion, food, gift and accessory shops. This represents 88 percent of the shop space. We have issued contracts on a further 8 percent of the total number of shops. We expect those contracts to be returned in the next two to three weeks. This would bring the total to 96 percent.
This may sound like a great success but the reality is that with six months until opening this is exactly where we need to be, we are not behind the program, but at the same time we are not ahead. Taipei 101 will be the home of a number of retailers that are new to Taiwan. The fabulous food emporium in B1 can be described as a premium-end supermarket.
PHOTO: SEAN CHAO, TAIPEI TIMES
The business has been planned in conjunction with the Dairy Farmers group -- who own Wellcome supermarkets. This incredible food area will showcase fresh and prepared produce in a fashion never seen before in Taiwan. Those who love freshness, quality, exotic produce, fine wine and other culinary delights will be right at home at Jason's Market Place [the concept store's trading name.]
This 800 ping store will fast become a favorite with "foodies" all over Taipei City.
On Level 1, known as "Main Street" you will find 34 of the regions most popular brands including the largest Mango, Espirit and Bennetton stores, along with the Dickson group's Sisley, Kenneth Cole and Tommy Hilfiger. On Level 2, "The Designer Walk," will be the home of the boutique department store [Sogo.] This floor will be heavily supported by the brands controlled by Fairton International, who have committed six brands including Marina Rinaldi, Gaultier, Kookai and I Blues.
PHOTO: GEORGE TSRONG, TAIPEI TIMES
On Level 3, our "Galleries Couture" floor is where -- and we are very proud to announce this -- Louis Vuitton, Celine and Loewe will be.
We are in final negotiations with another 10 super-brands which we hope to announce shortly. I am glad that we are talking about our luxury floor, I know that there are a lot of rumors about Taipei 101 and Shin Kong Mitsukoshi also located in the Hsinyi District. It is true that we are both after a similar segment of the market, i.e., high luxury.
The reason that I know Taipei 101 will prevail is because luxury customers want what we, and we alone can provide. That is a comprehensive and complete luxury fashion offer, located in superb international class surroundings with convenient proximity to high-quality dining. The fact is that our luxury floor can accommodate 20 to 25 luxury brands, all with equal exposure; our competitors' luxury floor can only accommodate four to six.
And finally, Level 4 in "City Square" is the jewel in the mall's architectural crown. The space is truly awe inspiring. It will become an internationally renowned public space. Principal architect C.Y. Lee and partners have created something that will rival the great public spaces of the world. In a retail context it will eclipse the well-known Land Mark building public space in Hong Kong. At a local level it will be far beyond the public spaces in Core Pacific Mall, in terms of size ambience, style and purpose. The "City Square" will be home to the Page One bookstore that will occupy an 800 ping location. The store will be another first for Taiwan and Taipei 101.
TT: How much is retail space going for per ping and how does it compare with other Hsinyi District prices?
Van de Velde: Let me give you an overview of the total leaseable numbers and how that compares to your average department store. The total lease area of Taipei 101 mall is around 10,000 pings and total floor area is 22,000 pings. The retail space is around 45 percent, which means Taipei 101 reserved plenty of public space for customers to create a more comfortable shopping environment. Generally speaking, the retail space is more than 70 percent for department stores because what concerns them the most is the efficiency per ping. The limited public area of department stores makes shopping a difficult thing.
As for other shopping centers, taking Breeze for example, its retail area is around 55 percent, which is better than a department store, but does not achieve Taipei 101's level. According to our research conducted by Taylor Nelson Sofres in 2001, consumers are longing for a more spacious, relaxing and less crowded shopping environment. This is what Taipei 101 can offer for customers based on their needs. In terms of rent levels, final rent value is directly connected to sales performance. It is fair to say that we are forecasting some of the highest rents in Taiwan.
TT: Most of the anchors are regional businesses. Was there any difficulty in attracting international players to set up shop in the mall?
Van de Velde: The growth in sales levels for international luxury brands in Taiwan is impressive. Taiwan for many brands now ranks second or third to the markets of Japan and Korea. Given this situation it is not surprising that regional players look to Taiwan for growth opportunities. The fact of the matter is that Taiwan, despite a recent increase in the number of malls is still undersupplied for enclosed mall space. Taiwan has 0.15m2 of enclosed mall space per capita.
This is low when compared to Malaysia [0.69m2], Singapore [0.39m2] and Australia [0.60m2] Taiwan's consumers are similar to the consumers in these markets. They have a love for international fashion food and entertainment. Therefore, business opportunities for our regional tenants are very positive.
In considering the complex equation behind a retail brand's choice of real estate, it is critical to remember this fact: Retail is in fact a "relationship business." The foundation of retail success is your relationship with the customer. This extends upstream to the retail brands relationship with the landlord or developer. All stakeholders need to focus exclusively on maintaining their relationships. This concept is the foundation of commercial success. This is something we do well, and we have had success with regional businesses.
TT: What is Lend Lease's relationship with Taipei 101?
Van de Velde: The Lend Lease engagement commenced over three and half years ago. Lend Lease is the retail consultant of Taipei Financial Center Corporation. Lend Lease was selected by the Taipei Financial Center Corp board to provide a suite of services relating to the development, leasing, marketing and retail design of the mall.
In terms of ongoing management the Taipei Financial Center Corp board has proposed that Lend Lease enters into a three-way, tripartite agreement with owners of Taipei 101 and the Citta Property Group to provide management services to the owner. The Citta Property Group consists entirely of senior ex-Lend Lease executives. The Citta skill set extends to property management, leasing and marketing, development and real estate investment. Citta Property Group in Taiwan has been established for the express purpose of providing world-class management expertise to the Taipei 101 project.
TT: Does Taipei really need another mall and how will Taipei 101 Mall differentiate itself from the new players Breeze and Core Pacific?
Van de Velde: Firstly Taipei 101 is not just another mall. We often talk about ourselves as Taiwan's first international mall. To be honest, local comparisons are not valid. Taipei 101 will compete on the international and regional stage. I believe that within one year of commencement, branded retailers will talk of Taipei 101 in same context as Pacific Place in Hong Kong and the Kuala Lumpur "City Center" in Malaysia, both of these projects are considered the industry standards in this region of the world.
Does Taipei need another mall? Yes it absolutely needs a mall of international standard, Why? Because it does not have one now. Look at the local competition. Have they attracted the cream of the regional and international tenants? The answer is no, not to the extent that Taipei 101 has achieved.
Ill informed commentators often say that the market here in Taipei is overly competitive, because of the flurry of new projects that have opened in recent years. The facts still remain that when compared regionally, Taipei is undersupplied for enclosed space.
Additionally it is a fact that the average Taipei household income has doubled in the last 10 years. It is also interesting to note that consumers in Taipei spend 1.5 times more money than other areas in Taiwan. All of these macro trends point to a growing and vibrant industry.
There are four factors critical to the success of a mall: One, location, two retail mix, three retail design and four ongoing management. Taipei 101 scores highly in all these these factors.
Taipei 101 Mall differentiates itself from Breeze and Core Pacific on these fundamental factors.
TT: The central "City Square" plaza of the mall is huge. How does it compare to other mall plazas in Taiwan?
Van de Velde: Both Core Pacific and Breeze have main event spaces, but not on the scale as our "City Square." The uniqueness of "City Square" is its size, ceiling height, natural light and flexibility of marketing function.
All major events of Taipei 101 will take place in "City Square" and we will try to develop it as a social focal point in Taipei. You can refer to other international examples, like the Landmark in Hong Kong and Kuala Lumpur "City Center".
For international comparisons that are relevant; there is nothing in a local context that can compete.
TT: How dependent will the mall be on traffic from the Taipei 101 tower?
Van de Velde: The tower reinforces the premium positioning of the mall, but it is not the primary traffic source. The mall would be highly successful without the tower but the fact that we have the world's tallest tower, which will be anchored with the Taiwan Stock Exchange and possibly a five-star international hotel, is significant. The primary trade area of Taipei 101 includes Taipei city and county, and this is important because this area has a lot of office workers within a 10-minute walking distance from Taipei 101 and wealthy residents in the Hsinyi District.
TT: The mall is scheduled to open on Nov. 14. What part did Taipei 101's fengshui master play in selecting the date and how much has he been paid to provide fengshui advice to the project?
Van de Velde: The decision regarding the date was based on comprehensive evaluations on market activities and project progress. From mid-November to the end of year, there are many primary exhibitions in the World Trade Center and anniversary promotions for department stores, including Shinkong Mitsukoshi and Sogo. These market activities, which will attract tremendous traffic and stimulate shopping behaviors, contributed to the decision of the opening date. Once we had selected a time frame in which to open the project, we consulted the fengshui master to identify the best date within that zone. In Taiwan I have learnt that fengshui plays a major role in all matters related to business, timing, design and location. Taipei 101 is no different, it's part of the process and I believe it is good for business. In terms of what was paid, I don't know, but in relation to the significance of the decision I see it as a very good value investment.
TT: What kind of financial projections does Taipei Financial have for the mall?
Van de Velde: The financial expectations for the project are significant. I am not authorized to discuss them with you. All I can say is that Taipei 101 is projected to be the industry leader in a number of key financial performance benchmarks.
TT: What kind of grand opening festivities are being planned for the November opening?
Van de Velde: We are really fortunate to have China Trust Commercial Bank as our co-brand credit card partner. This partnership creates powerful synergies for both parties and gives the mall significant marketing "fire power."
From an activities point of view, we will have a formal ribbon-cutting ceremony and a series of consumer oriented events and activities focusing on our target customers, particularly the core customer who is a single, white-collar female, aged 21 to 35. In addition to the events hosted by Taipei 101, our strategy is to support our tenants to hold co-op events to promote both the tenant's and Taipei 101's image. We will also start the loyalty program, including gifts with purchases, members-only events and reward programs, with our strategic partner, China Trust Commercial Bank.
Taipei Times: The Taipei 101 Mall had planned to sign on Sogo Department Store as one of the final tenants in recent days. How has that arrangement changed since media allegations reported SARS broke out at that store over a week ago?
Van de Velde: There is no doubt that the SARS situation has affected the Taiwan and Taipei retail industry in last few weeks, and as result all retailers have had to deal with the situation in ways that address their particular circumstances.
In respect to Sogo, their decisive action and management plan in relation to SARS has yet again shown that Sogo is a leader in the retail industry in Taiwan. Sogo's rapid and positive measures of temporarily closing their Chung-Hsiao store for three days to deal with SARS proved to be a correct strategy. In our opinion they have dealt with the issue effectively and as such have satisfied their loyal customer base. I thought it was particularly impressive that after the temporary closure Sogo was able to rebound with a very strong sales promotion the next day they reopened. This type of positive, "can-do" style of management, evidenced in their approach to the situation is exactly the reason that Taipei 101 wants to have Sogo as a major anchor within our mall.
In relation to our negotiations with Sogo, I speak to their senior executives on a very regular basis, and can report that the negotiation is continuing in a very positive fashion. We both feel confident that we will reach a mutually satisfactory conclusion to our negotiations in the very near future. Sogo like many other of Taiwan's leading retailers have identified the Hsinyi District as a "must have" location.
Expanding its business into Hsinyi is part of Sogo's strategic plan, and partnership with Taipei 101 would prove to be a powerful combination and offer extremely beneficial result for both parties.
TT: But what kind of strategy gets businesses around the fact that a good portion of the public is terrified to walk out their door?
Van de Velde: Looking at the big picture, I think that the only way in which the industry can face the SARS issue is to assume that it will pass in time. As such you need to keep moving forward, planning for growth, looking to see and find new ways to satisfy your customer.
It is simply not an option to stop, panic and surrender. The situation will pass in time, there is irrefutable evidence from the World Health Organization that the situation can be brought under control, as evidenced in other countries. If you look at the recent experience of Vietnam, Singapore, Canada and Hong Kong, the pattern is one of containment and or control.
Taiwan will follow the pattern of other regional markets. I have no doubt.
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