Future Holdings plans to go into China’s lower-tier cities
“We reached a conclusion that there are plenty of lower-tier cities for us to tap around the country. We are confident that our high-quality shopping malls will attract people”
Hong Kong-listed Future Holdings plans to venture into the country’s lower-tier cities with plans to develop 40 commercial properties over the next three years amid Beijing’s urbanisation drive.
Chairman Wang Zhenhua told the South China Morning Post that the mainland-based company would shift its focus from residential properties to mixed-use developments in a bid to transform itself into a top-level shopping mall developer.
“We reached a conclusion that there are plenty of lower-tier cities for us to tap around the country,” he said. “We are confident that our high-quality shopping malls will attract people.”
Future Holdings, one of the mainland’s top 20 developers, said it would develop 40 commercial properties by 2017, and increase that number to 80 in 2020.
Many developers are rethinking their business to survive the industry downturn, which has been compounded by the threat posed by the e-commerce boom to traditional shopping centres and department stores.
Wang would not disclose the investment cost for all 80 projects, but analysts estimated the figure could top 100 billion yuan.
Future Holdings is joining industry giants such as Shanghai Greenland and Dalian Wanda in seeking to tap mainlanders’ increasing purchasing power despite the inroads made by e-commerce operators into the retail market.
The chairman said Future Holdings’ projects, under the Injoy brand, would set aside more space for entertainment activities while reducing retail areas to attract visitors.
“The impact from an e-commerce boom will turn out to be minimal since our shopping malls focus on giving visitors more pleasant experiences during their shopping,” Wang said.
Future Holdings raised more than HK$2 billion in a Hong Kong initial public offering two years ago. The listing status would help the firm to raise funds to support its ambitious expansion into commercial property, Wang said.
Future Holdings would target sub-centres in second-tier cities and certain affluent third- and fourth-tier cities, he added.
In the second half of 2014, the developer secured three plots in Nanchang, Changchun and Anqing to build mixed-use projects. It reported sales of 20.6 billion yuan in the first 11 months of 2014, or 85 per cent of its targeted sales of 24 billion yuan for the full year.
Wang said the company was confident it would meet its full-year target, with buoyant sales in December. “Domestic demand in China has yet to be fully tapped,” he said. “In particular, some of the lower-tier cities in the country have huge demand for great shopping malls.”
The developer aimed to report sales of 50 billion yuan in 2017, Wang said.
In C-suite on Px, Wang Zhenhua discusses the challenges in the company’s strategic shift