Less than 24 hours after landing back in New York, half of the members of our real estate trek settled into Camille Douglas’s Global Real Estate Investment class. Despite some jetlag, our group of Chazen travelers were excited to share what we had learned in Hong Kong and Shanghai and have a newfound perspective and appreciation for real estate in China.
With 15 company visits and site tours, our group was exposed to all types of real estate firms from developers, real estate private equity firms, and family owner-operators to architects, brokers, hospitality companies, and public transportation operators. After a very full week, a few key themes became clear to us.
The office market moves fast. Cities see tens of millions of square feet being added to the office inventory over a couple of years (compared to just a few million square feet). The market changes so quickly that landlords don’t want to be locked into leases longer than three years and the large safe anchor tenants that are so coveted in the US, are passed over in China in favor of smaller tenants with limited power over the landlord.
Touring HKRI Taikoo Hui Center with Swire
Government intervention is a looming force in Chinese real estate. We heard about how when government initiatives are aligned with your business, you can expedite the zoning process (and perhaps also other regulations) to build a multi-family building in six months. On a much larger scale is the “One Belt and One Road” initiative, a modern-day Silk Road network of railways, roads, pipelines and utility grids that link China to Central, West and South Asia. Announced by Xi Jinping in 2013, One Belt and One Road is a massive undertaking that is a driving force behind all kinds of development with a strong focus in Central China.
Of course, for many others, the looming presence of an intervening government can be challenging and frustrating. This sentiment was indicated implicitly and explicitly by both foreign and local firms.
By the end of the week, we began to fully appreciate the sheer size of the country. Although population growth in China is lower than the US growth rate, the city is rapidly urbanizing with the equivalent of the population of New York City moving to Chinese cities every year. This provides strong tailwinds for urban growth and we learned from a number of companies about how they are addressing the housing needs of the growing population.
Our trip to China was a whirlwind learning opportunity and provided great insights to an exciting market. Many thanks to the student organizers, the Chazen Institute, our faculty and Paul Milstein Center sponsors Leanne Lachman and Kristin Svenningsen, all of the companies that met with us, and all of the students who joined the trip.
Meeting with Fosun Property in Shanghai
– Robin Lore ’19