Image source @ Visual China
Text | BBB Institute, author | Silver Waterfall, Li Xiao crooked
If you look at the beginning of this century, Hong Kong real estate enterprises are standing in the commercial real estate industry with a huge attitude. They are a revered presence in the interior and still have residual power.
Hong Kong-funded real estate companies such as Cheung Kong Industrial, Henderson Land Development, New World and Sun Hung Kai attacked the mainland in the 1980s and 1990s. New property concepts are pouring in, with "pooled area", "floor space" and "mortgage housing" impacting the then fledgling mainland real estate market.
For a time, the mature operating experience and business circle construction model of Hong Kong Real Estate Group have become a model for mainland real estate enterprises to learn.
In the round after round of economic development, Hong Kong enterprises have made a lot of money and won a lot of money.
However, commercial projects operate like horse racing, with gallops and ups and downs changing rapidly. No single business model can always dominate the market, and Hong Kong-funded real estate companies have always been in the rapids.
They planned the layout when the capital had not yet speculated in commercial real estate, and then divested non-core assets after all the players appeared, so that in the commercial real estate field, the concept of shopping mall (Shopping mall) was brought into Shanghai, and the land underwent earth-shaking changes.
We turn the timeline back to 1992, which was the starting point of the Hong Kong competition for the beach. Since that day, various heroes have gathered at sea, and each gamer has been practicing their ambitions step by step, planning a road that continues to open up the wilderness.
Friendly reminder, the full text is 13171 words, and the reading time is about 25 minutes.
01 Black first
In the Go board, holding the black first is the established rule, and it is also a subtle winning rate. The clever player is very strategic when playing the game, but the savvy player understands the rules of the ascending points before the start of the game. It's not a game of victory or defeat, but a race to the top.
The Hong Kong real estate group that entered Shanghai around 1992 was like a chess player who carried out black first. The policy spring breeze is light, awakening is a keen prey for money.
In July of that year, the State Council approved the approval of Sino-foreign joint venture retail enterprises in 6 cities and 5 special economic zones in Beijing, Shanghai, Tianjin, Dalian, Qingdao and Guangzhou. The entry of foreign capital into China's retail industry has thus begun, with Beijing's Lufthansa Friendship Mall sitting in the north and Shanghai's first Yaohan partner in the south, both of which are exemplary.
At that time, Shanghai residents' acceptance of foreign retail was extremely high, which was a good start for Hong Kong brands. When Portman's Shanghai Centre was inaugurated in 1990, Watsons, the light of Hong Kong retail, was in it. The famous Hong Kong Wellcome supermarket also opened a store, and some residents came here to buy 1 yuan a piece of coffee filter paper for grandpa.
Also in the same year, The leased land in Shanghai reached about 10,000 hectares, and the land officially became a factor of production in the market circulation, and the real estate tycoons who smelled the opportunity to take the lead in the port circle threw chess pieces and quickly shot.
The first batch of Hong Kong-funded real estate into Shanghai has thus arisen. Between 1992 and 1997, Hong Kong-owned real estate hoarded a large amount of land in Shanghai. Since 1992, Chan has led Hang Lung Properties to the mainland, betting on Shanghai, and taking two plots of land in Xujiahui and Nanjing West Road; Sun Hung Kai won the central plaza at the core of Huangpi South Road on Line 1, and New World was cut into a corner of Huaihai Middle Road next to Central Plaza, named New World Tower.
Most of the Hong Kong-funded real estate groups that can enter Shanghai are good at dancing with long sleeves, and their strong capital reserves are enough to match their ambitions.
After The return of Hong Kong in 1997, the political outlook and the recovery of Hong Kong's economy allowed the real estate industry to enter a new cycle of upward movement. In the tide of real estate in the transitional period, land prices soared and real estate prices also rose, and small and medium-sized real estate companies that lacked capital reserves simply could not afford to eat larger projects. This has indirectly led to the gradual market dominance of large-scale and powerful real estate groups, and they have gradually accumulated larger capital.
Feng Bangyan described it in "A Hundred Years of Hong Kong's Real Estate Industry" as "the situation of oligopoly gradually taking shape". So the oligarchs along the high-end shopping circle expanded on Nanjing West Road and wrote a heavy stroke on Shanghai Beach. The "Golden Triangle of Metaiheng", which rose around the turn of the millennium, subsequently became the birthplace of luxury goods in Shanghai.
Cheung Kong Industrial, owned by the Li Ka-shing family, became the first gold digger to open. In August 1997, Meilong Town Square opened at 1038 Nanjing West Road, and the interview location of the Visa Office of the U.S. Consulate General in Shanghai is still on the 8th floor of the building.
Across a Jiangning Road, CITIC Pacific rose to the ground three years later. In 2001, Plaza 66, the tallest building in Puxi, was unveiled. Not only luxury brands Hermes, LV, Dior, Chanel and Cartier are included, but more than 20 luxury brands such as Loewe, Fendi and Celine are also lined up.
Between 2000 and 2005, Wharf in Hong Kong opened in Shanghai Times Square, a pioneering business in the mainland, Xintiandi, a commercial retail project led by Shui On Group, was inaugurated, Andfford International's Jiuguang Department Store sprang up at Jing'an Temple, and department stores on both sides of Nanjing West Road Pedestrian Street seemed to have read the metaphor of fate. Shopping malls and commercial buildings defined by new terms such as Plaza and Square will take over traditional department stores on the stage of history.
By around 2006, Hong Kong-funded real estate began to dominate the world in shanghai beach. Hong Kong's six major real estate groups, Cheung Silsh & Huang, New World China, Henderson China, Sun Hung Kai Properties, Hang Lung Group and Kerry Construction, have all entered Shanghai. A survey by China Economic Weekly that year showed that the total investment of Hong Kong companies in the Shanghai real estate market had exceeded 20 billion yuan in one year.
Compared with other foreign-funded real estate, the performance of Hong Kong capital can also be remarkable. Compared with the diversified investment style of Singapore real estate and Japanese consortiums, from Nanjing West Road to Huaihai Middle Road, from Jing'an Temple to Xujiahui, about 80% of commercial projects such as high-end shopping malls and Grade A office buildings are all operated by Hong Kong.
Obviously, Shanghai has become a must for the head of Hong Kong capital.
02 Layout planning
Guo Bingxiang brothers, Luo Kangrui, Zheng Yutong, Bao Yugang, Liu Luanxiong, when these well-known Hong Kong rich and family, as early as the 1990s, looked ahead to the great opportunities in Shanghai, the first move fell on Huaihai Road, Nanjing West Road, a short few kilometers above, a huge chess game also began to win or lose unexpected variables.
There has been no same game in all eternity, and the number of plates is very impressive. On the Go board, any intersection can change three situations, one black, one white, and one empty. Shen Kuo talked about the final number of chess games in "Mengxi Pen Talk", which could not be pronounced because there was no name to be recorded. When all kinds of Hong Kong capital play chess, they are in a faction, but the commonality is that when buying land, they are "not afraid of cold ice and not afraid of hoarding land".
One background is that at that time, the asian financial turmoil swept through, so that the unit price per square meter of Shanghai real estate was nearly 1,000 yuan lower than that of Beijing, so the mainland real estate group was walking on thin ice. And Hong Kong-funded real estate that has experienced a turbulent cycle is optimistic about the long term, low-level entry, and is not afraid of cold ice. Wait until the land price is high, the market becomes hot, and it is not too late to enter the fight.
JLL China director Chen Limin has mentioned that the second wave of Hong Kong developers' investment in Shanghai came after 2006. Despite the sharp rise in land prices in Shanghai at that time, Hong Kong-funded developers still had a lot of room to operate. In particular, the "anti-fall performance" of Shanghai's high-end commercial real estate under heavy pressure has enhanced the confidence of overseas investors.
As mentioned earlier, Hong Kong-funded real estate with a keen sense of business is the best at coming to the new world that has not yet been reclaimed to open up the wilderness, and they are also the least afraid of "hoarding land to rise" after experiencing cyclical fluctuations. When the Pudong upstart had to cross the river to enter the city to buy a small sachet, Hong Kong real estate companies were already convinced of the future of the land.
Not only commercial real estate such as shopping malls are optimistic, but also the office building and hotel markets are also hot. According to a survey conducted by Colliers International around 2010, Lujiazui will occupy 41% of Shanghai's overall Grade A office market, which is 2.4 times that of the Huaihai Road CBD in the second largest region.
When Hong Kong tycoons decided to cross the Huangpu River and form a group to open a "copy of the shopping mall" in Pudong, Sun Hung Kai did not budge.
- Sun Hung Kai
Although it is also called Central Plaza, Shanghai's "Central" seems to be less lively than Hong Kong's Central. Sun Hung Kai Properties had never suffered such grievances before. In the 1980s, to complement the development of large residential estates in New Towns in Hong Kong, they built a large-scale mixed-use shopping mall in the city centre. As one of the masterpieces, the first phase of Sha Tin's New Town Plaza has a floor area of 1 million square feet, lasted for four years, cost more than 1 billion yuan, and introduced the rare mini cinema, roller skating rink and computer music fountain and other landscape facilities at that time, which is simply the highlight of the history of the development of Hong Kong's shopping malls.
In 2010, Shanghai IFC opened in Lujiazui, and hermes, LV, Chanel and other high-end brand flagship stores settled in. Since then, Pudong has a representative work that can match the high-end business district of Puxi, and the high-end shopping circle of Shanghai is no longer concentrated in the three major sections of Nanjing West Road, Xujiahui and Huaihai Road, but from west to east, multi-point flowering.
The Shanghai Association of Shopping Centers is accustomed to doing work briefings on a quarterly or monthly basis, and from 2004 to 2010, the official website only has an annual report, and by 2013 their workload has risen sharply, and there are too many shopping malls to observe and study.
An inquiry into the Shanghai local media Wen Wei Po, Xinmin Evening News, Oriental Morning Post and other reports in the same period found that shopping malls did break out in Shanghai in 2013. This year, K11, IAPM Environmental Trade, Jing'an Kerry and Shangjia Centre all entered the market. Academia began to subdivide these new species of shopping mall with terms such as exhibition, art, and luxury.
Also in 2013, the concept of shopping malls to create "urban complexes" also began to enter the professional field of vision. The shanghai council of shopping centers' 2013 newsletter documented the proposal of representatives that Shanghai should learn from Hong Kong's concept of an "underground urban complex" and connect public facilities with large commercial centres on the ground, with a subway station as the center. They believe that "humanized underground space should be rich in humanistic value, and the psychological distance of urban space will also change."
It's not just Hong Kong-funded shopping malls that are making efforts in this transformation, and almost all of the established business districts are involved. At that time, the person in charge of the Xujiahui Business Circle Energy Level Improvement Leading Group said to the media, "Now that the radius of consumption radiation in the business district has been greatly reduced, Xujiahui must plan to move and start a new business." As a result, Metro City specially created the Star Theater for the resident performance of Taiwanese director Lai Shengchuan's "Performance Workshop", and the renovation projects of the surrounding Shanghai Film Museum, Meteorological Museum and Xu Guangqi Memorial Hall also followed suit. A business idea with cultural creativity as the core began to surface.
At this time, some of the Hong Kong-funded shopping malls that entered in the early stage have already fallen into a dangerous situation in this chess game. Go pays attention to pre-opening planning, but once it enters the game, it must be broken. After the decline of the new world in the department store format was fully realized, Zheng Yutong's eldest grandson Zheng Zhigang decided to abandon his son and compete for the lead - this is also a game with the board of directors of the group and the family, whether he can get the right to speak, success or failure in this move.
- K11 New World
In 2013, K11 was renovated, and Monet on the three underground floors was released in March, with a total of 300,000 visitors, a single-day flow of up to 6,000 people, and some people took a 2-hour flight from Shenyang to Shanghai, just to see the authentic work of "Monet".
Zheng Zhigang's vision of K11 is that after watching the exhibition, you can experience pottery and baking in the underground living bazaar, and don't miss the jewelry shops of independent designers, who are not inferior to luxury brands located on the first and second floors. Further up, the more exotic trendy dining brands are the best places to party with friends.
The style and aesthetic of the traders are solidly permeated here. It spontaneously grew from the art field with a layout concept that completely broke with the traditional shopping malls and department stores, a "new aesthetic space", the so-called "museum retail industry", and Zheng Zhigang, who studied East Asian literature at Harvard and culture and art at the Stanford Kyoto Research Center in Japan, answered.
As a result, the K11 Art Fund, established in 2010, has pre-stocked a range of resources for shopping malls that have not yet opened, including international first-line museums, art galleries and individual artists. This is the exclusive artistic resource reserve of K11, and although there has been imitation by peers since then, it is rare to have the essence.
Compared with museums and art foundations, shopping malls at that time may be the most suitable scenes to achieve "aesthetic education in the popular sense". The former venue is too professional and the space design is not modern enough, the latter is too niche audience circle radiation is limited, and K11, which is located in the "art shopping mall", just avoids the shortcomings of both.
When two giant metal butterflies sparkle on the façade of K11, it's almost a metaphor for the subsequent turn of a group of high-end shopping malls in Shanghai – a new retail space "era of art exhibitions" is coming, All in or out?
In the history of Shanghai's shopping mall development, K11 is almost a miracle. Since March 2013, K11, with an average monthly traffic of 1 million people, has quickly led a shopping mall in Shanghai, with shop rents increasing by 70% and office rents rising by 30%.
K11 activates the monolithic space – both a compliment and a veiled criticism. The positive level is that in the context of the limited space itself and the difficulty of streamline design, creating a "museum-type shopping space" is an innovative move, which maximizes the activation of inner space vitality. But the criticism is that natural defects make it impossible for retail formats to be extended, and space experiments can only be limited to this single space.
The "Chess Classic" says, "Instead of loving a son to survive, it is better to abandon it and take advantage of it", and the trader's heart is like a mirror.
In August 2020, New World Development Company Limited bid for the "Huaihai Community C020102 Unit 055-2 Commercial Land Plot" for RMB4.111 billion. The second K11 in Shanghai will be erected at the intersection of Songshan Road and Middle Huaihai Road at the intersection of Huaihai Middle Road Street, Block 130. This compensated to some extent for the lack of the first K11 retail space, which would later be able to accept the illumination of its artistic function.
- Swire Properties
Contrary to K11's full activation of a single space, Swire Properties' thinking has always tended to be an open and extended "open city". Before the shanghai Qiantan Taikoo Li landed, this was already the first glimpse of the two projects in Beijing Sanlitun Taikoo Li and Chengdu Sino-Ocean Taikoo Li.
The traditional shopping mall is jokingly called "black box or square", a cement and steel building located in the city, no matter how thoughtful the designers are, how advanced the concept, after completion will somewhat squeeze the surrounding environment.
Modern malls also always try to put consumers in this controlled, isolated and closed environment, hoping that they will be infinitely immersed in the scene and stay longer to contribute more purchasing power. This manipulation may suppress the openness of the scene, thereby inhibiting "the vitality of people in the scene and the community."
Sanlitun Taikoo Li decided to open.
The first is the ratio of sidewalks to motorized roads, that is, the spatial walkability index determines the degree of tolerance for pedestrians and activities. According to the "Innovation And Evolution of Sanlitun Taikoo Li" report jointly produced by the School of Architecture of Tsinghua University and Swire Properties, the walkability index in the streets of the project is 0.86, which is much higher than the surrounding average, and the walkability index of tokyo ginza, Manhattan, New York and other business districts is only 0.40 and 0.35 in the same period.
When people walk in the neighborhood, the proportion of the sky in the line of sight that occupies the entire field of view is also one of the indicators of improving the sense of openness. Google Maps 2021 data shows that the crowded Tokyo Ginza Sky Visibility Index is 2%, while Sanlitun Taikoo Li reaches 14%. This fully guarantees natural light and allows pedestrians to have a comfortable and comfortable space to notice the shops on the street.
The completion of The Foreshore Taikoo Li in Shanghai in 2021 is further upgraded in terms of "openness". The 80-meter-long "Pleasant Eye Bridge" spans the huangpu river, and the "Sky Loop" that surrounds the roof of the fourth floor is composed of professional tracks and promenades, with a total length of 450 meters, which can record sports data through AI, and is also equipped with changing rooms and showers along the way.
Surprises always lead to wonder. After the opening, the uncles walking around the park regarded this place as an open "playground", and the exquisite aunts opened a small fragrance walkway in front of the Dior and LV enclosures. Some analysts believe that the final attraction of customers may not match the "high-end luxury" originally envisioned by Swire, but this dislocation has constructed "the most ordinary and simple present", that is, Swire Properties has always recognized that "people are the source of vitality and vitality in a place".
Man is important, but man, as a molecule in the environment, should not exist apart from the entity. Chengdu Sino-Ocean Taikoo Li tries to restore a space where heaven and earth and people coexist. The ground is a commercial space located underground, such as a tree root located under the surface of the soil, where people fill the streets, squares and alleys, while the roof of the Daci Temple floats above the street, forming a downward look.
Why is the roof of Daci Temple the highest? Why do carved dragon cornices stand proudly on top? The Daci Temple, first recorded in the Tang Dynasty, was once the center of the city. This area is not only a religious shrine, but also a commercial center, and a world distribution center for villagers, merchants, and literati. Swire wanted to reinvent the shopping journey as an urban experience and sculpt the buildings, squares and streets to make them a tinkering with the fabric of the city.
Image source: Swire Properties Official Report
The Oval Consultants Co., Ltd., who was in charge of the architectural design, mentioned that they referred to the picture of the Qingming River Map 1200 years ago, a simple commercial building structure, rows of simple sloped roof shops, which can accommodate blacksmith factories, retail stalls, "the building is just a framework for things to happen and not the focus". So quite humble and restrained in design.
The commercial buildings in the entire precinct are only 16 meters high, so as not to compete with the ancient temple complex. Not the focal point is that a traditional Chinese courtyard has been cleverly converted into a luxury watch shop. The quaint courtyard and the time-keeping instrument clock complement each other perfectly and are not obtrusive.
So you can see green brick buildings, winding streets and courtyards, and a network of humane communities. Centered on the conservation of Daci Temple, the best of the restored buildings, the Guangdong Guild Hall, is magnificent, deeply frosted, and retains the gathering function inherited from the past, and the green brick symbols on the side walls connect the sky (green tiles) and the earth (bluestone floor tiles).
Architect Luo Jianzhong explained that the size of the block, the distribution of streets and alleys, the height of the ceiling and the color used in modern materials all refer to and echo these traditional buildings. The well-planned paths to shopping malls and hotels have allowed these old buildings to dwindle visitors and use them as landmarks to discern directions.
Contemporary architecture and modern malls indulge in the glory of distinctive signs, best illustrated by the crisp cement lines and reflective glass curtain walls. Skyscrapers are racing, skylines are rising, flashing neon lights and giant buildings are racing to show off, and that's speed and development.
Therefore, new cities also attach importance to commercial floors, consumption replaces communities and prospers, and business forces communities to die. The shopping malls surrounded by buildings here are also bulging on the city's contour lines, only for brand status and luxury.
But after all, the mall belongs to the suburban model, it needs to be open, it needs to be integrated with people and things and the environment. At this point, whether it is Sanlitun Taikoo Li, Ocean Taikoo Li or Qiantan Taikoo Li, they are both counterexamples and examples, and the hutong culture represented by the former and the hidden lane genes of the latter are emphasizing these fragile trunk road branches and alleys and should not be forgotten.
The bigger vision lies in the "urban renewal, regeneration center". Known in 1980 for its smoky miasma of "Bar Street", Sanlitun was a gathering place for expatriates and locals. After the turn of the millennium, it was rebuilt with an "open city" forward-looking framework, with retail sales and rents rising.
Daci Temple has returned to its central position in Chengdu and even in the southwest region. At this point, the third Taikoo Li in Shanghai's Zhangyuan Garden may carry such expectations.
Compared with Hang Lung's focus on luxury and artistic innovation in New World, Swire Properties reveals more literati and connections with the local area. In reports such as "Innovation And Transformation of The Development of Hong Kong Island East and Taikoo Place" and "Innovation And Evolution of Sanlitun Taikoo Li", they propose four dimensions to measure "community building": community vitality, economic livelihood, community well-being and community resilience, which are also the core of Swire Properties' "2030 Sustainable Development Strategy".
In the industry, Swire Properties is known for its "slow strategy". In the 14 years of operating Sanlitun Taikoo Li, the renovation and upgrading of software and hardware was injected into the project in batches. Hardware, supporting hotels, activity venues Red Hall, floor renewal, escalators, passenger flow lines and other transformation is a gradual process, the software music festival, three-mile garden, guide signs, LED digital 3D video and night economy pilot is the guarantee of activating the community. These factors have contributed to the continuous renewal of retail formats.
Over the past decade, the number of merchants in the fashion accessories, art and leisure and service categories has increased significantly in the North and South districts. After completing the optimization of flowable lines, building structure upgrades and the installation of 700 solar photovoltaic panels in 2018, rents increased by 17 percentage points in 2019.
Understanding this, you can understand why Swire was able to win Zhang Yuan, and why it was determined to win this project. As the largest, most complete preserved and most abundant Shikumen complex in Shanghai, both official and local residents hope to hand it over to developers with more cultural protection experience, while Shanghai Xingye Taikoo Hui has not been able to give full play to its ability to build communities due to the cramped sense of space limited by the land.
If you only take K11 and Swire products, the example of Hong Kong-funded shopping malls fighting on the beach is not good enough. The former knows how to abandon the son to compete for the lead, the latter knows not to be greedy, and the two laws in the Go world are implemented to the fullest. But there is also a player who entered first, which can never be ignored.
- Hang Lung Properties
Hang Lung is the Hang Lung of jing'an temple residents, hang lung of Puxi, and hang lung in Shanghai and the entire Yangtze River Delta. This is not an exaggeration. The first move almost sets the final game, and the precision of the direction allows it to always lead the way.
In 2007, After seven years of operation, Plaza 66 became the first "Yueyilou" building in Shanghai, and in 2010 it jumped to the first "Yue shuangyilou", and when the bell rang in 2022, Hang Lung's tax payment exceeded 10 billion yuan, becoming the first "10 billion building" in downtown Shanghai. This figure exceeds the annual revenue of many midwest counties.
Luxury goods are the killer skills of Hang Lung, and the high-end retail industry is also rising against the trend under the epidemic. The Group also has historical roots with luxury goods: between 1993 and 1994, Hang Lung's Amoy Real Estate transformed the "Food Street" into a "Famous Shop" in the area of BaideXin Street in Causeway Bay, after which the property value rose sharply to save the lonely Food Street.
This is the result that Chen Qizong, who insisted on going north into the mainland 25 years ago, expected to see. In 1991, he took over the burden from his family, but the conservative strategy had made Hang Lung slightly inferior to his contemporaries.
The Shanghai Plaza 66 plot at the intersection of Nanjing West Road and Xikang Road was not easy to come by, and when Hang Lung entered Shanghai in 1992, Lin Petsheng, then a director of Hang Lung Properties, met with the bidders on January 17, 1993 and negotiated for 11 months before taking it down on December 22, 1993.
"Geographically, there is no better piece of land in Shanghai, where the two most iconic properties at the time, the Shanghai Exhibition Centre and Portman, were right next to each other and at the crossroads. So it's definitely the most likely benchmarking project and the most core and best piece of land in Shanghai."
Hang Lung invested US$300 million to fulfill its commitment to Shanghai. This was also the highest total price project for the large-scale renovation of Shanghai's Jing'an District that year, and since then, luxury brands have quickly entered, and the window furnishings have begun to fight.
Interior design practitioners come to Hang Lung to "learn from", and their renovation speed is also industry-leading. The two-year mega-tweaks from 2015 to 2017, the 2021 Hermès and Bulgari camera updates, and the Burberry flagship store also unveiled the fence. A designer who has been in the industry for 12 years told me that not only the colors on the flat display, the placement of objects in the space, but also the lighting of the window are exquisite. In a recent floor renovation, Hermes's logo shimmered at night, reflecting the irregular ore façade.
The most important core of a luxury mall is to provide the ultimate luxury "exclusive experience". Every year, the dressing queue starts, and dozens of high-end luxury brands will provide members with exclusive/first products for the whole family, and the VIP customer base is relatively stable. Other CRMs also do a good job, open the public account and questionnaire about the shopping experience and service, even the details of the parking lot will be taken into account,
The stability of the VIP customer base is of great importance to Hang Lung. Dongxing Securities Research Report shows that before the epidemic, two-thirds of Chinese consumers' luxury consumption occurred overseas, and now the channel has undergone a structural shift. The BCG report also shows that domestic offline luxury purchases have increased from 32% last year to 59%, and it is difficult for Plaza 66, which gathers high-end luxury brands and high-consumer customers, not to stand on the C position.
03 The board is reversed
In the chessboard of commercial real estate, when one of the pieces is out of control of the rules due to unpredictable events, the chess game will gradually appear biased. A business soul in a game world full of unknowns may have collided with incredible changes.
Hong Kong-funded housing enterprises have always been plagued by the scarcity of land on the island, and the personalized development of intensive farming has been its long-term operating model. Its shopping malls in first-tier cities in the mainland are mostly laid out in core plots, so it will be more timely to lengthen the development cycle, eat through the land premium, and improve the profit margin of the project.
And the situation has arrived, the next move of Hong Kong-funded real estate enterprises, summed up in one word, is "selling". The value of long-term slow development is evident here, with the Li family selling the Guangzhou Xicheng Duhui Plaza as the anchor point, Hong Kong-funded real estate enterprises have entered a period of successive sale of their real estate projects.
Since 2013, from Nanjing International Finance Center, Beijing Pacific Century Center to Shanghai Pudong Century Hui plot, Li Ka-shing has sold mainland assets in two years, cashing out nearly 100 billion yuan alone; by 2015, New World Group has packaged and sold nine projects in Chengdu, Guiyang, Beijing, Shanghai and Qingdao to China Evergrande for a total price of 33.9 billion yuan. The total construction area of these 9 projects exceeded 12 million square meters, which was almost half of the new world soil reserves at that time. Later, Huaren Real Estate announced its withdrawal from the Chengdu market. Other Hong Kong-funded real estate enterprises are no longer radical, standing still, or directly withdrawing from the cake division of the mainland market.
The flowers bloom in two, one on each side. Although Hong Kong-funded real estate enterprises do not have the prosperity of the end of the last century, how should the story tell when they jump to the opponents of Hong Kong enterprises to observe this chess game?
In the past two decades, mainland real estate enterprises have undoubtedly grown rapidly. They are more adaptable and flexible to changes in the policy environment, and they can move forward with determination. Hong Kong-funded real estate companies are better at slow-cycle development, and the strategy of land hoarding is particularly cautious in contrast to the aggressive expansion of the mainland.
It seems that we cannot judge which methodology is more appropriate in a historical sense. But in a fast-paced duel, the side that moves slowly will inevitably fall into the disadvantage at a certain time.
In July 2000, Wanda embarked on the development of its first commercial real estate project, Wanda Plaza, Chongqing Road, Changchun. It was a start, and over the next few years, "department stores" became synonymous with lifestyles and immersive consumer experiences, with mainland real estate developers settling down to develop their first commercial complexes.
Chess players have clouds: the high one is in the abdomen, the lower one is on the side, and the middle one occupies the corner. First-tier cities are naturally commercial hinterlands, and they are also the most common shoals for soldiers to fight. And when Hong Kong people gradually settle down in the mainland and build grand commercial sieges in Beijing and Shanghai, rookies will naturally take the lead in extending their tentacles to the far side of the corners.
This also makes sense of the aforementioned Hong Kong-funded land sales. Why cut love? In the final analysis, second- and third-tier cities are indeed a "sand that can't be held" for the current Hong Kong-funded housing enterprises. The way New World and Chinese real estate are run is to lay out a lot of time and carefully develop for more than ten years. To be a shopping mall is a slow job for Hong Kong people to exchange "past and present" for "future".
With this means of slow expansion, to jump out of Beijing and Shanghai, it is impossible to take over the rest of the cities - the markets in second- and third-tier cities are already difficult to control, and it is the world of China Resources and New Town Holdings. Therefore, instead of grabbing the bye in the hand, it is better to transfer the land to get the benefits immediately, which is a trick to move, and also leaves a way for themselves to continue to take root and go north.
In the heavy luxury market, Hong Kong capital has obvious advantages. Hang Lung, Swire and Wharf have a steady pace of performance, with their early years of winning advantages and brand resources, but their project reserves are limited.
Mainland enterprises, on the other hand, are gaining momentum. China Resources has 8 luxury high-end shopping malls, which bloom everywhere in Shenzhen, Shenyang, Nanning, Hangzhou, Xiamen, Chongqing, Tianjin and other places. In 2021, the sales of these eight luxury centers increased by 88.5% year-on-year, of which the performance of Shenzhen Bay MixC increased by 225%.
Deji Plaza sits in Jiangdong, radiating Jiangsu and Anhui provinces, thanks to this local advantage, it has become the only single full-format high-end shopping center in Nanjing; in 2021, the turnover of Deji Plaza exceeded 20 billion, an increase of 30% over 2020.
In 2020, Beijing SKP's retail sales increased by 15% year-on-year to 17.7 billion yuan, with a total passenger flow of 15 million passengers, and the sales volume of a single store and sales output per square meter was the first in the world. SKP's retail revenue in Xi'an rose 36% year-on-year, making it the fastest-growing high-end shopping mall in northwest China in 2020. In addition, SKP is also located in Kunming, Chengdu, Guiyang and other cities, with the goal of reaching 10 stores.
The emergence of Deji and SKP "Shop King" is instructive, because luxury brands are the real barriers to high-end shopping malls.
The heavy luxury players in the first-tier cities have long formed an oligarchic pattern, but the world is sinking, so the eastern coastal cities and inland provincial capitals have become the hinterland where all kinds of people and horses will inevitably fight, new projects such as bamboo shoots have emerged, and land acquisition and transformation of the original stock are also two-pronged. According to the data of Winshang Network, the number of shopping malls (centralized retail properties with a commercial floor area of ≥20,000 square meters) in the country in 2021 hit a record high - reaching 1113.
New Town Holdings is one of the late entrants in the chess game, and only opened the first Wuyue Plaza in Changzhou, Jiangsu Province in 2012. However, in the past two years, it has added the largest number of new shopping malls every year, and as of January 25, 2022, The Number of Wuyue Plazas opened and under construction in the country has reached 191, covering 136 large and medium-sized cities in China. From the perspective of urban layout, the location of Wuyue Plaza is mostly third- and fourth-tier cities, and there is a trend of gradual encirclement by latecomers.
Between the vertical and horizontal development of domestic real estate enterprises, there are many clouds of stars, and occasionally foreign department stores have laid foundations in the mainland.
In 1994, Singapore's CapitaLand group entered the Chinese market, thus opening the way for the development of the Chinese market. It inaugurated its first Raffles City in 2003, the largest project Singapore had invested in Shanghai at the time. This was followed in 2017, 2018 and 2021 by Raffles City Changning Shanghai, LuOne Crystal And Raffles City on the North Bund.
It is not difficult to see that CapitaLand's layout in Shanghai is deeply rooted in the core business district of the city center. Among them, the three Raffles City Square have shown a butterfly change from commercial complexes to urban communities from 2004 to 2021.
In addition to Raffles City on the North Bund, 2021 is also significant for CapitaLand. A new face appeared on CapitaLand's Chinese official website: Yang Qinfu, Deputy Chief Executive Officer of Business Management of CapitaLand Investment (China). The manager, a self-effacing business newcomer, mentioned in a conversation, "Immerse yourself in the market, quickly capture the consumption habits of each city, the positioning differences of each shopping mall, and have a direct dialogue with grassroots partners in the process."
It is true that in the face of different consumers, different shopping malls need to have both commonalities in the general direction and different refined portraits. Raffles City On the North Bund is a fusion of culture, art and trends, and the nostalgic city bazaar of the 90s has also been recognized – a unique memory of Hongkou.
Yuexing furniture started in 2000 shanghai Yuexing Home Plaza, and in 2013, Yuexing Global Harbor, which integrates shopping, catering and entertainment, opened. With a total area of 480,000 square meters, 270,000 square meters is a shopping mall, it also has the largest roof garden in Shanghai (30,000 square meters) and the shopping mall with the most parking spaces (2,200).
This kind of giant format is rare, especially in the time node of the Internet economy in 2013, whether it is industry or capital, it has to draw a question mark on this project.
In 2018, the sales performance of Shanghai Global Harbor was 9.8 billion, which is quite a strong figure. Moving forward 5 years, Global Harbor took off at the same time as K11. From the perspective of cultural and artistic formats, they have similarities and just meet the needs of current consumption upgrading.
Shanghai New World Daimaru Department Store, which opened in 2015, is located on the plot of No. 163 Nanjing East Road, which also has a bitter and bitter history. In 2007, the 163 block of land in Huangpu District was sold by way of public listing, with a land area of 13,709 square meters and a starting price of 2.5 billion yuan. At that time, the market was still the world of Hong Kong and foreign capital, and a large number of strong players gathered, such as Sun Hung Kai, Swire, CITIC Pacific, Tishman, Wharf, and Singapore Government Investment Corporation GIC. In the end, the dark horse Suning Global won the place with 4.404 billion yuan. Later, under the crisis of 2008, Suning retreated. So the land was transferred to state-owned enterprises, and Shanghai New World and Huangpu District State-owned Assets Corporation pulled in Daimaru Department Store as partners.
The J.Front Group, which owns the brands of two century-old department stores in Japan, Daimaru and Matsusakaya, entered China in this way.
Whether it is a far-sighted march or a rapidly changing unexpected drop, looking back at the development process of Shanghai commercial real estate in recent years, players are in an era of fierce competition, and a trend of stock hand-to-hand combat has been formed.
In 2015, 36 shopping malls opened in Shanghai, and in the same year, 40 of the 112 shopping malls began to renovate and adjust, accounting for 35.7%.
Excess is inevitable, and the problem of "homogenization" is put on the table. Looking at Shanghai, iapm's "fashion", Jing'an Kerry Centre's "light luxury", K11's "art", and Global Harbor's "big" have become the labels of each company - building brand value and fine management have become golden rules.
For so many of Shanghai's commercial real estate competitors, they are both rivals and friends. Together, they have created a business atmosphere that has made Shanghai a more unique city, and hot money needs to be exported continuously, and new brands will follow the opportunities emanating from this land.
At the moment when the domestic and foreign investment groups are rising, we look back at the Hong Kong-funded real estate in Shanghai, and the results are still good.
In the first half of 2021, Hang Lung Properties achieved revenue of HK$4.975 billion, an increase of 19% year-on-year, and net profit attributable to the mother of HK$2.235 billion, compared with a loss of HK$2.537 billion in the same period last year. Among them, the mainland revenue was HK$3.295 billion, an increase of 45% year-on-year, and Hong Kong revenue was HK$1.68 billion, down 12% year-on-year – Hang Lung's revenue growth in the mainland market was very strong, covering the decline in Hong Kong's performance.
Image source: Hang Lung Properties' 2021 Semi-Annual Report
In 2019, Hang Lung Properties' mainland and Hong Kong were relatively close in terms of income. According to official data, in 2019, Hang Lung Properties' revenue was HK$8.556 billion, mainland revenue was HK$4.544 billion and Hong Kong's revenue was HK$4.012 billion. Therefore, in the current epidemic situation, concentrating on the development of high-end business segments is the best choice for Hang Lung.
2021 is also a warming year for Swire Properties. In the first half of 2021, Swire Properties' property investment income was HK$6,247 million, property sales revenue was HK$2,394 million and hotel revenue was HK$427 million. In the same period of 2020, the revenue of these three businesses was HK$6,147 million, HK$130 million and HK$274 million respectively.
Image source: Swire Properties Semi-Annual Report 2021
New World Real Estate, which holds a large amount of cash, is also more confident to do the merger and acquisition of the next project. According to New World's 2021 interim report, Sales of Shanghai K11 increased by 37% over the same period last year, and the growth trend was particularly strong at the end of the year, with Sales of Shanghai K11 rising 22% in December 2020, the highest sales record since its opening in December.
Image source: New World Group's 2021 semi-annual report
Performance growth, coupled with the acquisition of 130 block plots in The Middle Huaihai Road Street, this recovery made Zheng Zhigang say bluntly in the performance report:
"The worst is over."
04 No regrets
It's a game of chess that spans centuries. Over the decades, several major families and real estate groups have experienced various ups and downs, changes and inheritances, and they still have potential energy that cannot be ignored. Although it is not possible to call the wind and rain, nor is it 100% successful, in the decades of changes in commercial real estate, Shanghai has been able to tolerate dissent with the most open and tolerant attitude, and iteratively evolve with the most intense and rapid attitude.
In the market is good, it constantly divests a series of non-core assets, and under the force majeure factor, it is in line with the original vision of Hong Kong-funded real estate for the land of Shanghai.
According to PwC's 2021 Global Consumer Insight Survey China Report released in September 2021, the presence of offline stores remains indispensable despite the increasing choice of online shopping by Chinese consumers. According to the data, 53% of Chinese consumers still regularly visit physical stores in the current epidemic, which is an increase of 3% compared with March of the same year.
Image source: PwC
In 2021, there will be 29 shopping malls with a commercial area of more than 30,000 square meters officially opened in Shanghai. Raffles City North Bund, Ruihong Sun Palace, Maetan Taikoo Li and Jiuguang Center opened before and after, and Zhang Yuan, the 2nd and 3rd K11 will also appear one after another.
Chess is compared to the endurance of the player. In the protracted war, more opportunities will emerge. This time, policy comes first.
In 2018, Shanghai first proposed the "first store economy", which refers to a region that uses its unique resource advantages to attract domestic and foreign brands to open stores for the first time in the region, so that the brand value and regional resources can be optimally coupled. In October of the same year, Huangpu District issued the Interim Measures on Docking the China International Import Expo to Encourage the Introduction of Brand First Stores, encouraging well-known brands to open their first stores in key business districts such as Nanjing Road and Huaihai Road. By April 2021, the Shanghai Municipal Commission of Commerce had asked to "step up research and formulate policies and measures to support the economic development of the first launcher."
Brands such as Nikon's first direct store in China, Asia's first "Wonderlab" Swarovski flagship store, and burger shop Five Guys have settled in Shanghai. According to the Shanghai Municipal Commission of Commerce, more than 1,000 new "first stores" will be added in Shanghai in 2021. The six super business districts of Nanjing West Road, Huaihai Middle Road, Xujiahui, Lujiazui, Nanjing East Road and Xintiandi account for one-third of the city's first stores.
In the wave of first-time stores landing, playing "concept" is the primary way of layout of these well-known brands, and flagship stores, theme stores, and concept stores have attracted a large number of Gen Z shopping punch cards.
Shanghai is not only the city where the brand's first store is prioritized, but also the manufacturing place of new consumer brands. In this wave, the cultural and artistic industry is showing a rapid upward trend. Duo Catch Fish Bookstore is located on Anfu Road, and the Laughing Fruit Factory has settled in 5 shopping malls: Jing'an Joy City, Jing'an Kerry Centre, Global Harbor, Hopson Hui and LuOne CapitaLand Crystal.
In this process of commercial development, a variety of new and old blends have been born. From the Sinan Mansion and Shangsheng New Institute in the early years, to the Hengfu Style District composed of Streets such as Wukang Road and Anfu Road, each stock project is pregnant with the power to turn decay into magic.
In this force, Shanghai's unique Lilong culture has spawned the development of community business forms. In the past two years, the previously unpromising small and medium-sized commercial podiums and the disorganized bulk commercial streets have begun to be centrally rebuilt and opened.
Wuyi MIX320, Lane 8 of Jinchao, Shaanxi Kangli, Yongjia Road 309 Pocket Park... Surrounded by large shopping malls and department stores, these community commercial centers are spread over quieter roads, dredging shanghai's "capillaries".
It is precisely because of the experience and confidence inspired by the city that Hong Kong-funded enterprises have also begun to re-plan their layout in the Greater Bay Area. K11 Asia flagship store, Shenzhen Lan Kwai Fong, Qianhai Kerry Centre and other shopping malls are the key preparatory projects.
As it was a few decades ago, Hong Kong companies remain cautious. Kerry Construction entered Shenzhen in 1997 and did not take over the Qianhai plot until 2018. New World only won the Qianhai Commercial Residential Land in 2016, and then held the olive branch of investment promotion to promote the landing of K11 and Lan Kwai Fong in Prince Edward Bay.
The difference is that Hong Kong companies are no longer frantically hoarding land, but refined operations.
AT Kearney's report, The Future of Shopping Centers, notes that the main challenge facing shopping malls is to define retail spaces in new ways, where people are closely related to brands, experiences, entertainment, service providers, lives and work, and more. Connected consumption space. In the future 2030, four different shopping mall models will dominate, namely: large spaces centered on large attractions, smart spaces, value centers, and retail spaces.
In the shopping mall of the future, there must be no model that is easy to copy. Instead, it explores the novelty and inspiration brought by commercial real estate to the city, and brings the regional characteristics to the extreme according to local conditions.
Or also guess that when Hong Kong people look at the commercial center they have built, they will also feel the darkness and haste of the past. When you leisurely recall the bauhinia on Kowloon Island, or the busy and intertwined figures of Central, you will also have some resemblance to the once desolate area in front of you.