Since the beginning of last year, the commercial real estate market has struggled to meet anticipated recovery benchmarksA multitude of factors such as the continuous increase in new office space, insufficient demand for effective office usage, and the growing flexibility in corporate work modalities have contributed to rising vacancy rates in major citiesAt the same time, projects are under pressure for absorption, leading many landlords to adopt a strategy of lowering rents to attract tenants.

The current uncertainties in the industry have further tested the operational management capabilities of developers and operatorsHowever, amid these challenges, some companies have demonstrated robust capabilities in project absorption, successfully increasing office rental rates steadilyThis situation indicates that resilience and strategic management are critical in navigating the shifting market landscape.

Recently, at the 2024 Commercial Real Estate and Asset Management Conference, many participants from the commercial property sector expressed that the building economy continues to be a crucial engine for urban economic growth

This discussion highlights a shift in the perception of office buildingsThey are no longer viewed merely as isolated structures or as traditional commercial propertiesInstead, they have become important carriers for various economic factors, creating reasonable spaces for businesses to thrive.

According to insights shared by industry analyst Cai Yun, the vacancy rates for office spaces in major cities such as Beijing, Shanghai, and Shenzhen surpassed 20% in the first quarter of this year, with some third-tier cities witnessing rates as high as 40%. The decline in market activity has significantly impacted the ability of real estate holdings to remain viable through rental revenuesThis suggests that a more concerted effort is required to generate demand through innovative property offerings.

Amidst the ongoing struggles, Cai Yun pointed out that practitioners in commercial property management should focus on identifying emerging productive forces

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For instance, industries like electronic information, biotechnology, and renewable energy are steadily increasing their demand for office spacesRecognizing these trends could allow developers to better position their offerings in a competitive marketplace.

Furthermore, Cai emphasized that to maintain stable appreciation and value retention for office buildings, businesses must operate efficiently and responsiblyA compelling example from the Beijing market illustrates this pointLiu Xudong, head of the office segment at Zhaotai Group, shared that their company owns eight office buildings in key locations such as Zhongguancun, Financial Street, and the Eastern Second Ring, amounting to roughly 600,000 square meters of commercial spaceDespite facing increased pressure in recent years, they have managed to keep their vacancy rate relatively low, at around 8%, by continuously enhancing their operational standards.

Faced with market downturns, Liu explained that Zhaotai adjusts its operational strategies based on the life cycle of each office building

For instance, during the supply surge between 2005 and 2008, the market witnessed an influx of approximately 1 million square meters of new office space annuallyConversely, supply decreased significantly in the years leading up to 2019. Recognizing the obsolescence of properties from the earlier supply spike, Zhaotai has adapted its offerings to ensure they still meet current market demands, luxurious standards, and the specific characteristics of different neighborhoods.

In addition to providing requisite space, an increasing number of commercial operators are also contemplating additional value-added services for their tenantsZhang Cunli, deputy general manager of China Overseas Property's commercial management division, stressed the importance of ecosystem-driven operationsFinding ways to assist tenants—from providing governmental resource access to enhancing their operational efficiency—creates a mutually beneficial relationship that can lead to long-term success.

Yang Jin, chairman of CITIC, noted the growing prevalence of automation, mobility, personalization, and experiential design within commercial service settings

Multipurpose complexes like Wanda Plaza and CapitaLand's malls cater to diverse consumer needs by combining shopping, dining, entertainment, and office space under one roofAdditionally, cultural and creative hubs such as Shanghai's M50 and Beijing's 798 Art District illustrate how the blending of cultural industries with real estate initiatives can yield vibrant community spaces.

Moreover, further innovations are occurring through the integration of digital technology—such as AI, VR, AR, cloud computing, big data, and blockchain—into facility managementEnhancing efficiency by leveraging smart services and energy management systems leads to notable improvements in operational effectivenessAs the commercial property sector continues evolving, significant transformations regarding product offerings, service delivery, and management practices will be seen as well.

Interestingly, there is an increasing demand for asset securitization within commercial real estate

Yang noted that in 2023, China issued asset securitization products worth 1.85 trillion yuan, culminating in a total outstanding scale of approximately 4.35 trillion yuanNew policies have been enacted to support insurance asset management companies in participating in asset securitization and to minimize the capital occupied by asset-backed securities (ABS) in commercial banksThe application of commercial real estate securitization and Real Estate Investment Trusts (REITs) acts as a financial innovation tool aimed at balancing risk while reducing leverage.

Yang further explained that traditional commercial properties like shopping centers and office buildings play a significant role in the underlying assets of these REITs, as demonstrated by the established markets in Hong Kong and SingaporeThe revenue streams for malls, office buildings, serviced apartments, and parking facilities stem largely from rental income and property fees, contributing to a stable cash flow that aligns with REIT frameworks