The Ghost Malls of China: Inside a Commercial Real Estate Bubble

Empty Chinese MallsTo many observers, the Chinese property market has been exhibiting signs of a bubble. "In Beijing," reports Time magazine, "vast swaths of commercial space sit vacant -- including floors of retail space right next to the iconic Water Cube, the swimming venue for the 2008 Olympics."
In addition to the glut of commercial space, China appears to have too much room for living: "Based on international comparisons," the Economist Intelligence Unit reports, "a country at China's level of GDP per head should have 20 square meters of living area [per person]." (That's about 215 square feet.)

In fact, the figure for China is over 30 square meters, "which would mean that China is 53% over-housed." Even so, building continues apace: According to The Wall Street Journal, "Official data show 2.98 billion square meters of residential property under construction at the end of February."

And the overcapacity isn't limited to real estate. Chinese industry has been churning out massive amounts of steel, cement, and aluminum -- so much that there are doubts about the economy's ability to absorb the output. "With home prices now following transaction activity sharply lower," concludes Christopher Pavese, CFA, chief investment officer at Broyhill Asset Management, "the biggest risk for the Chinese economy, as well as the rest of the world, is a sharp slowdown in new construction." Pavese, who maintains the blog The View from the Blue Ridge, recently went on a research trip to China, and shared some images from the Chinese real estate bubble -- if, in fact, a bubble it is -- with DailyFinance.

China's empty mallTo the right are images from a shopping center in Zhuhai, a city of 1.5 million people located on the Southern coast of Guandong Province, where it sits in close proximity to both Hong Kong and Macau. Pavese reports that a common refrain from the government officials encountered by his team was the belief that "developing new cities and building new infrastructure will increase consumption."

"Judging by the lack of foot traffic in this home furnishings mall," Pavese concludes, "you could say that I am slightly suspicious."

"And the striking gentleman at the railing in the photo on the right is none other than Cullen Thompson, CIO of Bienville Capital Management," Pavese reports, "not a Chinese home owner. Although -- full disclosure -- the two women shown on the left picture may very well be actual Chinese consumers." Still, it's an ominous showing for a country that regards domestic consumption as a "key area" in need of improvement.

Real Estate Numbers Chart for China

Below are images from inside the Global Furnishing Design and Exhibition Center in Shanghai, the largest city by population in the world (excluding suburbs), "and one where you might expect to see more than a few signs of increased consumption," in Pavese's words:

China malls empty

As you can see, that expectation is not at all borne out by the eerily empty corridors and vacant stores inside.

Empty China Mall

For more information on the Chinese property bubble, and more images of empty malls in Shanghai, head over to Also Sprach Analyst.

Increase your money and finance knowledge from home

How to Avoid Financial Scams

Avoid getting duped by financial scams.

View Course »

Timing Your Spending

How to pay less by changing when you purchase.

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:
Ronald Malozi

Another lie and hype Wall Street and the media told the masses that China is booming. It was all a bunch of lies like everything else.

April 26 2012 at 7:42 PM Report abuse rate up rate down Reply

i will never say never

April 20 2012 at 10:01 PM Report abuse rate up rate down Reply

If you look at how rich people live you will see there is way more square footage than necessary, but if sure looks cool. Could this be the case and walmart is their business?

April 19 2012 at 9:37 PM Report abuse +1 rate up rate down Reply

Maybe I'm missing a point here but I wonder what time these pictures are taken?

April 19 2012 at 2:59 PM Report abuse +1 rate up rate down Reply

iLLEGAL IMMIgrants,well they r ever where,and r not just chineese or i'm i the only one that know's this fact?(just look at B O's uncle) I don't think so, we should deport all of them, arizona law should apply every where!.we as AMERICANS have no right's cause they have been givening to the illegal's right,i know(think) as a free country key word(free)and they come here cause they get it all! the amount of iegal Immigrants r over wellmen.welfare was 1st ment to help those who needed it to serve,feed thire children,not to get rich,buy smok's,and many other thing's(i c it happen )and i'm sure it happen's in other city's then just mine.SOCIAL SECURITY? i worked my hole life for it ,i c drug addicte's and alcoholic's and people that have't worked a day in thire life's and Im migrants that cant spek a word of eng. get it,Really?how,why,Cause r Government thinks they should ,they get money to poen store's,byt house's,i know people that have family come here and get welfre and s.s ,get put into hotel's,new car's.a lot of them get more then me.then at the 1st of each month they partty harded,where i live i watch em till eather the cops come,or the emt's,come most r homeless cause thats what they chose,not cause they lost a job,and those how have lost thire job's can't get the help they god bless u and ur's

April 19 2012 at 1:56 PM Report abuse -1 rate up rate down Reply
J. R. Gilbert

"Chinese industry has been churning out massive amounts of steel, cement, and aluminum -- so much that there are doubts about the economy's ability to absorb the output."

OK. We all know what comes next. China will start "dumping" it's excess production on the world market and create another global recession.

April 19 2012 at 11:55 AM Report abuse +1 rate up rate down Reply

One thing you won't hear the Chineese complaining about at their malls...How everything in all the stores is MADE IN CHINA.

April 19 2012 at 8:08 AM Report abuse +4 rate up rate down Reply

globilization is whats happened,gas is high because private companys sell to the globe not just us,everybody needs work so jobs have been spread out all over the world not for any other reason but to make money thats why people start companys ,big corporations make jobs if u.s.a. wants jobs the enviroment for them needs to be so they can turn a profit ,any idea about evil rich companys just want profits yea duh why you think people start companys so they can make a good living ,if you dont like your job start your own company .america needs to get back to making the best products for the world we have a higher standard here and the world knows it ,they prefer to have it made in america not china we seem to be the ones who prefer chinese products ,hell just look at walmart. If we had americans that were proud to be americans we would be a lot better off. we are a not communist country you can still make your own future here. If things dont work out dont let it bring you down figure a way out and up and keep on truckin'

April 19 2012 at 7:57 AM Report abuse rate up rate down Reply

China appears to have too much room for living:... this is good news, Unlike the United States, China don't pay kids to have children like we do, example I think on A&E the show is called "16 and pregnant" or a couple who's on welfare has 20 children and when them 20 children grows up they'll have 20 children each and on welfare and the U.S. has to pay for all their living expenses. Taxes on the working people and everything we do including breathing is taxed because of our over populated country. China must go for quality and the U.S. goes for quantity. This is why the U.S. is in so much dept to the point of bankruptcy.

April 19 2012 at 4:42 AM Report abuse rate up rate down Reply
1 reply to lpi2007's comment


April 20 2012 at 4:17 PM Report abuse rate up rate down Reply

There is an IKEA right next door to the Global Furnishing store in Shanghai (I live here) and it is packed 7 days a week. The Global Furnishing mall gets very busy on weekends, so not unlike a lot of malls back in the US...

April 19 2012 at 3:29 AM Report abuse rate up rate down Reply