"Shopping malls need a certain target population. Obviously, shopping malls that don't get enough people through the door will fail," said Ye Tan, a financial columnist.

"Over the next five years, there'll be many an awkward moment when a shopping center opens with no population around it," said Hawkey.

Developers and investors need to be aware of possible polarization in rentals and vacancies, with good shopping centers continuing to perform well financially and poor centers failing completely, according to the Cushman & Wakefield report.

Analysts also pointed out that high homogeneity of the shopping centers positioning is also responsible for the oversupply.

"Shopping malls in different cities look the same and basically have the same stores," said Iven Du, Director of Retail Services of Knight Frank LLP.

Behind the boom

Facing the government's tough measures to calm home prices starting in 2010, property developers have turned to commercial properties.

According to Wang Haibin, an analyst at Shenzhen World Union Properties Consultancy Co. Ltd., the major reason for the boom of the commercial property sector is that it is not subject to tightening measures and is unlikely to be targeted by future policy changes.

Over the past three years, China has emerged as a major commercial real estate market, with direct investment volume doubling from $8 billion in 2008 to over $17 billion in 2011. China now ranks as the world's sixth largest market, an impressive growth story given that an active investment market only started to build in 2005, said a recent report by property consultancy firm Jones Lang LaSalle, headquartered in Chicago.

Sino-Ocean Land is one of the developers that have increased their investment in commercial properties. Its profits in 2011 grew 14 percent year on year, and it has "adjusted marketing strategy in response to changing market conditions," according to Li Ming, Chairman of Sino-Ocean Land Holdings.

Sino Ocean will spend half of its capital to develop commercial properties every year, with the other half going to residential properties, Li said.

Other developers vied to grab a share of the tasty commercial real estate sector. The Beijing-based Poly Real Estate Group announced in March that it will raise its investment in the retail property sector to 30 percent of its total investments.

Such moves helped boost the retail property market. According to the National Bureau of Statistics, the sold area of commercial properties rose 12.6 percent, while sales volume increased 23.7 percent in 2011.

Commercial property is set to become increasingly lucrative for investors and developers, especially in certain key second- and third-tier cities, said Tang Daizhong, Deputy Director of the Jingwei Real Estate Research Institute in Shanghai.

Another fact worth noticing is that local governments also played a role in creating commercial property bubbles.

"Local governments that wanted to undertake these grandiose projects are to blame for this blind expansion in the commercial property sector," said Du.

High-end shopping malls and their glitzy appeal are what local governments want to improve their image and add a boost to their economies through extra taxes and job creation, said a report of the 21st Century Business Herald.

Local governments even provided taxation rebates and low-interest loans for developers of commercial properties.

Urban planning administrators should enhance supervision and regulation of the commercial property sector, said Wang Xiaoping, General Manager of Suzhou Hanyu Real Estate Consultancy Co. Ltd.

Hawkey pointed out that insufficient supervision of the planning of commercial properties is attributable to the blind expansion and oversupply.

"Government planners only impose a restriction on the proportion of commercial property on a land, but how this commercial land should be planned is to be decided by the developers themselves," said Hawkey.

According to the Cushman & Wakefield report, investors need to work closely with retailers and be able to anticipate their future needs.

"We believe the future for retail development and investment lies with increasingly specialized companies that understand retailing, have international exposure and understand the latest trends and concepts in retail design and management. While there is as yet little evidence of such developers emerging, watch this space," said the report.

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