Why the first Starbucks in China closed today

June 21, 2013
June 21, 2013

At noon in Beijing today, Starbucks’ first store in China served its last drink. The day passed uneventfully, but Chinese bloggers reflected on the reasons why one of the biggest foreign chains in the city would be closing a storefront.

Rumors of the closing of Starbucks’ store on the bottom floor of China World Shopping Mall in downtown Beijing had circulated on Chinese social media since early June. Bloggers wondered whether it was because of Beijing’s surging rent prices. The company has since said the closure is because it plans to move to a new nearby location (link in Chinese) with bigger space and better décor. But the Financial Times reports today (paywall) that staff members have cited rising rent.

And that’s where Chinese residents and Starbucks have something in common. Over the past few months, the government has been trying to rein in runaway real estate prices that have put renting or buying homes out of reach for many regular Chinese. But prices have been slow to come down. One blogger wrote (registration required), “If Starbucks couldn’t manage to stay on, how can regular people afford to?” Another said, “This highlights the rising costs of rent and labor.”

China’s harsh real-estate landscape might make it hard for Starbucks to keep its pledge to have 1,000 stores in China by the end of the year. Most of its stores now are in major cities like Beijing, where authorities are paying less attention to bringing down commercial property prices. Commercial property in Beijing grew 23% in May, compared to 15.2% in residential real estate. Regardless of where Starbucks moves in Beijing, it might have trouble making rent.

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