A rising number of Chinese developers hope to diversify their portfolios by tapping into the property leasing market as they aim to reduce risk exposure by venturing into the more challenging commercial real estate segment.
"A growing number of Chinese developers, though still very few, are making efforts to optimize their asset combinations by adding more commercial real estate into their portfolios," said Vincent Luk, managing director of DTZ East China, a major real estate services provider. "Our experience gained from well-established real estate markets around the world has proved that developers will be less vulnerable to ups and downs if they have a certain proportion of lease-only commercial real estate as these projects can generate stable capital inflow in the long term."
The domestic developers have another reason to diversify because of the tightening measures imposed by the central government to rein in speculation in the country's overheated housing market, which have cut their transaction volumes.
In early April, China Vanke Corp, the country's largest publicly listed real estate firm which has built its name as the country's leading home developer, acquired Yingjia Center, an office building in the heart of the Beijing's CBD area. It was the firm's third and latest attempt in the segment over the past month.
Poly Real Estate Group, a large state-owned developer, said on April 13 that it aims to raise its investment in commercial property for leasing to 30 percent of the total over the next three to five years.
Gemdale Corp, another major listed developer, also announced earlier that 20 percent of its investment this year will go into commercial real estate projects.