Having a Brief Look into the Commercial Properties in China – Part 1 浅谈中国商业地产（上）
Commercial properties are broadly referring to many different types of properties which generate stable income streams for their owners, such as offices, shopping malls, hotels, car parks and so on. In this issue, we will take a brief look on few of them to have a quick and brief understanding of the commercial property in China.
Shopping mall has its unique attraction to shoppers in China. Its attractiveness is far higher over the street-front stores. Reasons including the large difference in decorations as well as convenience. With the rapid growing economy, more and more shopping malls are opening in the country. Actually the fast growth in supply is making industry players worry about over-supply.
A leading luxury mall operator in Beijing pointed out the current situation of the operating environment in China. As shoppers are getting richer, many of them could afford for an overseas trip for shopping of the luxury item. This is also attributed to the continual appreciation of RMB and the heavy import tax. On other hand, many shoppers with less affordability have changed to e-channel for shopping. Hence the operating environment of shopping malls in China would face challenges in the short run. The strategy of this operator is to shift the tenant mix from luxury brands to more food and beverage stores, saloons, spa and beauty, and banks. All these tenants provide supporting function to the office tenants in the same area, and thus support its offices’ leasing. In new project developments, increasing offices area and reducing that of retail would be the trend.
Under the environment of new challenges including slowing inbound tourism, the impact of government policies on promoting austerity, the increasing number of hotel rooms and rising operating costs, it is believed hotel operators are striving to pass the un-easy times. It is believed that many hotels are concerning the introduction of new policies as this might affect their operational strategies. Hotels were targeting meetings, incentives, conventions and exhibitions (MICE) and F&B, and all these have been affected after the government announced the eight rules on promoting austerity. .
In addition, as more internationally-branded hotels continue to enter China, hotel markets in most cities were impacted. This will enhance the level of each region’s hospitality offering and improve hotel management at the same time, thus contributing to the overall quality and development of China’s hotel industry. Domestic hotels are also paying more attention to themed hotels. They are creating more products that meet the needs of different market segments to cope with increased competition in response to new challenges.
Luxury and upscale hotels are likely to show minimal growth in light of several recent new hotel additions and reduced corporate travel. However, the domestic leisure market is expected to be healthy and the in-bound tourist arrivals are also expected to be increased steadily. Such would be the good news for hotel operators during the current operating environment.
Although services apartments are not overlapping with the market that the hotel serves, the operating environment in the near term is also facing pressure. Additional new supply will continue to put pressure on the residential leasing market, especially the serviced apartment market in the Tier-1 cities.
Meanwhile, demand from multi-national companies (MNCs) is expected to remain flat. Due to the generally slowed globally economy, and even China posted milder growth recently. MNCs are focusing on streamlining, maximizing efficiencies and cost saving rather than expanding. MNCs are also now accelerating their localization through the promotion of local employees. Hiring overseas Chinese is also an alternative than expatriates. This is because the quality of these Chinese employs is improving and they have the advantage of having a better sense of the local market. In addition, many expatriates have chosen to leave China due to the severe air pollution problem.
Because of these pressures and weakened demand, high-end serviced apartments’ occupancy rates and rents are expected to be moderately in the near term.