Asset management trend set to dominate sector

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 realized that they can maximize 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 longterm 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, over- seas investment in the mainland’s en bloc commercial properties amounted to 78 billion yuan ($11.6 billion) last year, representing growth of 60 percent from 2017. CBRE expects the active momentum to continue this year.

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 programs have been started with the help of industry experts in the city.

Anticipating a talent gap, Chan’s company has launched training programs 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 programs 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,”