Chen Wenjing: Commercial real estate or will become the "second growth curve" of housing enterprise development

　　Zhongxin Jingwei January 12 Title: Commercial real estate or will become the "second growth curve" of housing enterprise development

　　Author Chen Wenjing, Associate Research Director, Index Division, Middle Finger Research Institute

　　Since 2021, the "three red lines" for real estate regulation and control and the "two concentrations" policy for the transfer of residential land in 22 key cities across the country have accelerated the integration and reshuffle of the real estate industry. Some housing enterprises have problems such as debt default due to their inability to react quickly.

　　The drastic changes in the external environment have pushed enterprises to begin to explore inward and find new models that they can transform and develop. On the one hand, housing enterprises continue to strengthen the operation and management of the main business of real estate development to achieve cost reduction and efficiency increase; on the other hand, enterprises continue to diversify their business to test the waters to disperse the operational risks under the pressure of funds and achieve sustainable development of enterprises.

　　With the expansion of domestic consumer market demand and the diversification of commercial ecological development, the commercial real estate business has become the "second growth curve" that housing enterprises are optimistic about because it can form a coordinated development and mutual promotion with the main business of residential development.

　　In recent years, housing enterprises have continuously spun off the property management business sector and listed, forming a wave of enthusiasm in the industry, and more and more housing enterprises have chosen the business development model of "light and heavy".

　　Unlike residential development, commercial real estate needs to obtain rental income through continuous and stable operation, and ultimately achieve value preservation and appreciation of the entire project. The level of operation and management of enterprises is crucial to the success of commercial real estate projects, so commercial operation services have a broad market development space.

　　The head housing enterprises have accumulated operational experience and cultivated excellent operation teams through high-quality projects, which will eventually form the brand effect of corporate commercial operations. Housing enterprises can actively expand third-party projects, carry out asset-light operation business, and achieve enterprise scale expansion.

　　In terms of the development strategy of asset-light business, some real estate enterprises choose to adopt the strategy of "light and heavy", taking asset-light operation as a supplement to asset-light business, and gradually expanding the scale of asset-light business. Some real estate enterprises have chosen to divest the asset-light operation business sector for independent listing, so as to broaden financing channels, expand business scale, and allow enterprises to grow faster and independently under market supervision, such as Baolong Commercial, Xingsheng Commercial, and China Resources Vientiane Life, which have been listed in Hong Kong, and Wanda Commercial Management, which is currently impacting Hong Kong stock listings.

　　In October 2021, Wanda Commercial Management, a commercial operation platform under Wanda Group, submitted a prospectus to the Hong Kong Stock Exchange. Wanda Commercial Management intends to issue shares to the world for investment and acquisition to expand the area of properties under management, transform scenes, hardware, and strategic investment. If Wanda Commercial Management can be successfully listed in 2022, it may become a shareholder in the development of the industry and raise the capital valuation of the commercial management industry as a whole. We believe that there will be more real estate companies or will split the commercial management business sector for listing.

　　Previously, many property management companies of housing enterprises have won the recognition of the capital market with policy support and sustainable profit model, and enjoyed a high valuation level. Today, the property management sector of most of the leading housing enterprises in the industry has completed the spin-off and listing, the industry listing dividend has basically ended, and the valuation has returned to stability. As a commercial operation business segment in the field of property management segmentation, with the expansion of the consumer market and the emphasis of housing enterprises on commercial real estate business, it has ushered in good development opportunities. (Zhongxin Jingwei APP)

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