Insearchof newhunt­ing­grounds

China Daily (USA) - - SHANGHAI - By WU YIYAO in Shang­hai wuyiyao@chi­nadaily.com.cn

While do­mes­tic de­vel­op­ers are en­gaged in a fierce bid­ding war for in­vest­ment op­por­tu­ni­ties in top tier cities in China, for­eign cap­i­tals are in­stead look­ing at op­por­tu­ni­ties in sec­ond and lower tier zones.

In­dus­try ex­perts say that many com­mer­cial prop­er­ties within smaller cities that neigh­bor re­gional hubs — Taicang near Shang­hai and Zhong­shan near Guangzhou, Guang­dong prov­ince — re­quire bet­ter man­age­ment of their premises be­fore they can achieve fur­ther growth and those for­eign cap­i­tal in­vestors are keen to pro­vide so­lu­tions to this is­sue by up­grad­ing these prop­er­ties to meet the con­sumer de­mands of to­day.

William Cheng, ex­ec­u­tive chair­man of Malaysian Lion Group, said the re­tail di­vi­sion of the group, Park­son Re­tail Group, will now fo­cus more on lower-tier cities and seek to trans­form its depart­ment stores into broader com­mer­cial com­plexes in the fu­ture.

Ac­cord­ing to Cheng, the re­tail group will also con­sider ex­port­ing its man­age­ment so­lu­tions to other re­tail­ers in the coun­try.

Justin O’Con­nor, the CEO of real es­tate in­vest­ment firm Sav­ills In­vest­ment Man­age­ment (Sav­ills IM) said that re­turns can be gen­er­ated from not only ris­ing prop­erty prices but also from the value that man­age­ment and op­er­a­tional ex­per­tise add to a prop­erty.

O’Con­nor said that Sav­ills IM can lever­age its ex­per­tise in man­age­ment and its net­works of ex­perts with lo­cal know-how to lo­cate and take over un­der­per­form­ing as­sets. Fol­low-up mea­sures then in­clude ren­o­vat­ing and repo­si­tion­ing these prop­er­ties so that they can gen­er­ate higher yields.

Sav­ills IM had pre­vi­ously re­lied on mar­ket re­search and con­sumer sur­veys to up­grade a shop­ping mall in a third-tier city in south­ern China into a com­plex that of­fers a greater va­ri­ety of op­tions to con­sumers, in an at­tempt to raise rental rates by two to three times.

Such in­vest­ment man­age­ment will bring steady and sta­ble re­turns, ac­cord­ing to Jin Guo, head of Greater China in Sav­ills IM.

An­a­lysts say that the lo­gis­tic prop­er­ties mar­ket will also see strong de­mand from third-party lo­gis­tics providers as e-com­merce and re­tail com­pa­nies con­tinue to drive de­mand and ex­pec­ta­tions. Sup­port from cross-border e-com­merce will also likely ben­e­fit this sec­tor fur­ther.

Ac­cord­ing to Steven To, USB Se­cu­ri­ties an­a­lyst, lo­gis­tic in­vestors are seek­ing op­por­tu­ni­ties in cities with fast-grow­ing pop­u­la­tions, am­ple land sup­ply and easy ac­cess to ex­press­ways, such as Wuhan of Hubei prov­ince, Chengdu of Sichuan prov­ince and Chongqing.

In sub­ur­ban Shang­hai ar­eas such as Jiad­ing and Qingpu dis­tricts, in­vestors have been in ac­tive talks re­gard­ing op­por­tu­ni­ties to de­velop lo­gis­tic projects.

Ear­lier this year, Aus­tralian Good­man Group ac­quired A-REIT Ji­ashan Lo­gis­tics Cen­ter in Ji­ashan, Zhe­jiang prov­ince, from As­cen­das REIT for $26 mil­lion.

This lo­gis­tics cen­ter is lo­cated at the south­west­ern border of Shang­hai and has a to­tal gross floor area of 35,729 square me­ters.

Wayne Huang, gen­eral man­ager at Good­man China, said that the lo­gis­tic prop­er­ties mar­ket has great po­ten­tial in China, and it may be­come the world’s largest con­tract lo­gis­tic mar­ket in the near fu­ture.

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