‘Asset management’ an important concept in China’s real estate sector

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Chamberlain Institute president Zhou Xinyi. CHINA DAILY

Property management does not begin and end with daily maintenance, according to an industry expert. Instead, the trend for “asset management” that has developed on the Chinese mainland has been especially important for owners of high-end office buildings, he said.

Real estate asset management has only become an important concept in the property sector in Shenzhen, Guangdong province, in the past five or six years, according to Mike Chan Yee-ki, head of property and asset management at the Shenzhen branch of JLL Inc, a real estate services company.

The change to the business model came when large developers hit hard times. High-end properties weren’t selling, so they ditched the old “build-and-sell” model, and began holding on to newly constructed properties. It quickly became apparent that developers could increase profits by retaining properties.

According to Chan, a growing number of developers have realised that they can maximise profits by adopting this asset management approach. Grade A commercial properties in prime locations are hard to obtain, and long-term investment in such properties can bring higher returns than strata sales.

The new strategy is aimed at long-term gains on assets. As an example, Chan noted that one technique is to assemble a premium tenant mix, which is sustainable and attractive to new tenants.

Some property owners on the mainland were so eager to fill the buildings with business tenants that they discarded selective leasing. That left many buildings half-empty after just one or two years when some tenants shuttered their operations, he said.

He cited the Bank of America Tower in Admiralty, a business district on Hong Kong Island, as an example of successful asset management, and noted that leasing rates remain among the highest in the city, easily comparable to office towers in the Central district.

“Even after 40 years, it [the BOA Tower] still looks good from its appearance, the status of its facilities and property, and its portfolio of occupants,” he said.

While the market for real estate asset management has developed on the mainland, big property owners are unable to find enough qualified managers.

Competition for asset managers has intensified as foreign investors join the market. International investment funds such as Blackstone are moving into the market in search of real estate projects, Chan said.

According to the 2019 Real Estate Market Outlook, published by the consultancy CBRE, overseas investment in the mainland’s en bloc commercial properties amounted to 78 billion yuan ($11.6 billion) last year, representing growth of 60 per cent from 2017. CBRE expects the active momentum to continue this year.

Hong Kong saves the day

The shortage of qualified managerial talent has prompted many mainland property owners to look to Hong Kong to fill the gap.

As a result, a number of training programmes have been started with the help of industry experts in the city.

Anticipating a talent gap, Chan’s company has launched training programmes for managers of high-end offices in major mainland cities.

He said the company has also boosted recruitment of Hong Kong talent in recent years to keep up with the growth in demand.

Others believe that new training programmes will provide more hope for the talent supply in the future.

“A lifelong study platform based on a points system has been established with support from both the industrial and educational sectors,” said Zhou Xinyi, president of the Chamberlain Institute, a training body for the real estate and property management industry in Shenzhen.

She used a vocational training programme that opened in October at an education centre as an example.

The project, operated by Zhou’s institute and offering distance education and degree courses, was commissioned by the China Property Management Institute and the Open University of China, she said.

Zhou added that the training platform has been structured to meet the industry’s demand for different levels of managers and employees, and said she is seeking cooperation with industrial and educational sectors overseas, including Hong Kong and Macao.

According to Chan, fierce rivalry for real estate asset managers will continue for some time, and the sustainability of commercial properties will largely depend on how the assets are managed. CHINA DAILY/ANN