HK's big names find competition is getting tougher
With the rise of competitors such as China Vanke and Shanghai Forte, Hong Kong developers are losing ground in the mainland's residential property market but still have the edge in office and retail developments.
Competition has become stronger as mainland and international investors rush to get on the mainland's real estate high-speed train.
Given their improved financial position, mainland developers are now taking a bigger slice of the housing market with projects in both major and second-tier cities. They have a better understanding of the locals' living style and present projects of comparable quality to those developed by Hong Kong rivals.
Francis Li, executive director of DTZ Debenham Tie Leung, said the mainland's property market had grown with the emergence of well-established, cash-rich domestic developers.
'Among them are publicly listed companies. They are now very professional in every aspect of housing development, from construction to design and marketing. They also have a good grasp of buyers' tastes and enjoy lower operating costs than Hong Kong players,' he said.
Hong Kong developers have to establish separate teams in mainland cities to oversee their ventures, which puts them at a disadvantage on costs.
Mr Li said Hong Kong's big guns now tended to acquire larger sites and undertook huge developments involving a mix of hotels, offices, shops and apartments which made their investments more cost-efficient with economy of scale.
There is no doubt many mainland developers can rival Hong Kong's best in the provision of property hardware such as facilities and design. But in management planning and expertise, they have a lot of catching up to do, especially in commercial developments.
Mr Li said many mainland developers preferred to sell office and retail properties to individual buyers to generate cash flow, which created significant leasing and management difficulties. 'Hong Kong companies are much better in the management planning for offices and shopping malls. Their stronger financial position means they can retain ownership of these properties for long-term investment,' he said.
'Large multinational companies would like to move into well-managed office buildings under single ownership. Hong Kong developers' management expertise also ensures a better mix of retail tenants for their shopping malls, and they have always co-ordinated marketing initiatives well to attract customers.'
Their good connections with international fashion brands and retailers gave Hong Kong developers another advantage in planning retail projects in China, he said.
Sherman Lai, managing director of Centaline (China), said Hong Kong developers had been keener to take up new projects over the past two years.
'They would like to diversify from a small and relatively mature [Hong Kong] market, and the mainland is a huge market with plenty of business opportunities. Most of them are still focusing on key cities like Beijing and Shanghai,' he said.
Mr Lai said mainland developers were aggressive, particularly in housing, and competition with Hong Kong operators had intensified significantly.
'Local developers are as good as Hong Kong companies in housing developments. But they lag behind in the quality of commercial developments, which is especially obvious in the management of shopping malls,' he said.
'It will take a bit of time for local developers to catch up with the level of expertise of their Hong Kong counterparts. But they are learning really fast these days, and Hong Kong players should brace themselves for more competition in the future.'