Chinese Real Estate Shifts Focus to Commercial

12-Jul-2012

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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

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By , From Mingtiandi site,

As Residential Property Boom Fades, Developers Look to Office and Retail

At recent meetings across China where property developers announced 2010 financial results, confident real-estate executives told their investors about an important, and collective, shift in business strategy: From this year forward, commercial projects would replace residential properties as the industry’s new focus.

The coordinated messages marked the first, formal indication of common interests toward the commercial market among key players in an industry that’s grown rapidly on the back of booming new-home demand.

“We will adjust our investment accordingly. In the past, our sales relied on residential homes,” declared Xu Rongmao, chairman of the developer Shimao Property Holdings. “We are now more involved in commerce and tourism.”

The commercial market is clearly smaller and probably less profitable than the residential sector in China. But surely the nation’s developers have thought out the future of commercial development, the opportunities as well as potential traps. Or have they?

Impetus to Grow

The central government has made clear that it wants to promote economic development by raising domestic consumption levels. That position, in turn, has raised investor confidence in spending and income growth among urban residents.

Real-estate developers, property funds and investors have been charmed by the story of China’s consumption growth as well.

Xu said the latest shift fit the pattern set by the government’s 12th Five-Year Plan, which has prioritized the service industry and advanced manufacturing over labor-intensive businesses and high-risk, low-return companies for the period ending in 2015.

An executive at one listed property firm told Caixin that, unlike the residential sector, the commercial-retail property market is not exposed to the government’s macroeconomic controls. This is a key factor that’s attracted developer attention.

Besides, the executive said, a shift from residential to commercial real estate goes with the economic flow encouraged by the government.

According to data from real-estate analyst Jones Lang LaSalle, property-industry investment in China last year totaled about 5 trillion yuan ($765 billion). Less than 30% of that amount went toward commercial projects — a ratio essentially unchanged from 2006 to 2010.

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