A new era of building management
Property management doesn’t just end with daily maintenance. There’s a later evolution into “asset management” on the Chinese mainland. It’s especially important for owners of high-end office properties, an industry expert observed.
It’s only within the past five or six years that the concept of real estate asset management became an important part of the property sector in Shenzhen, Guangdong province, says Mike Chan Yee-ki, head of property and asset management at the Shenzhen branch of JLL, a real estate services firm.
The trend to change the business model came about when large developers hit hard times. Their high-end properties weren’t selling, so they replaced the old build-andsell model and started to hold on to newly completed properties. Experience soon revealed that by retaining properties, the developers could increase their profits.
According to Chan, more and more developers now realize that they can maximize the profits by adopting the asset management approach. Grade A commercial properties in prime locations are hard to get and long-term investment in a property can bring a higher return on investment than strata sales.
The new strategy aims at longterm gain on assets. For example, Chan said, one aspect of asset management is to assemble a premium tenant mix, which is sustainable and attractive to new tenants. Some building owners on the mainland were eager to disregard selective leasing. Buildings ended up half vacant after one or two years, as some tenants shuttered operations.
He cited the Bank of America Tower in Admiralty, a central business district on Hong Kong Island, as an example of successful asset management. Leasing rates remain among Hong Kong’s highest, comparable to the office towers in Central, Chan said. “It still looks good from its appearance, the status of its facilities and property, and its portfolio of occupants even after 40 years.”
The market for real estate asset management has emerged on the mainland. Big property owners, however, can’t find enough qualified managers.
The competition for asset managers has intensified as foreign investors join the market. International investment funds like Blackstone are moving into the market in a big way, in search of real estate projects, said Chan.
According to the 2019 real estate market outlook issued by the consultancy firm CBRE, overseas investment in the Chinese mainland’s en bloc commercial properties amounted to 78 billion yuan ($11.6 billion) in 2018, representing a 60 percent year-on-year growth. And the consultancy expected the active momentum to continue in 2019.
The shortage of qualified talent in the industry has prompted many mainland property owners to look across the boundary to Hong Kong to help fill the gap. Some training programs are being mounted with the help of Hong Kong industry experts.
Anticipating a talent gap, JLL Shenzhen has launched training programs for high-end office building managers in major mainland cities. Chan said the company had also increased recruitment of Hong Kong talent in recent years to keep up with the growth in demand.
Others believe that the newly built education structure in the industry will provide more hope for the talent supply in the future.
“A lifelong studying platform based on a point system has been established with support both from the industrial and educational sectors,” said Zhou Xinyi, president of Chamberlain Institute, a Shenzhenbased institution specializing in continuing education within the modern services sector which includes real estate asset management, large scale community and property managements.
She refers to vocational training at a continuing education center opened last October. The project, operated by Zhou’s institute, offers distance education and degree courses. It was commissioned by the China Property Management Institute and the Open University of China, she said.
She said a training platform has been structured to meet the industrial demands for different levels of managers and employees. She is seeking cooperation with overseas industry and education sectors, including those in Hong Kong and Macao.
In the future, Chan predicted, a fierce rivalry for real estate asset managers will continue for quite some time. The sustainability of commercial property such as highend office building depends on the asset management to a substantial degree, he said.