China property manager Colour Life plans to expand to 10,000 communities by 2020
Pan Jun plans to extend Colour Life’s community services to 10,000 mainland China residential communities by 2020
Although an increasing number of mainland Chinese developers are diversifying into property management and grabbing market share, Colour Life Services Group, China’s largest property management firm by residential floor space, is not worried as its business model is not easy to replicate, said chairman Pan Jun. A spin-off from Shenzhen-based property developer Fantasia Holdings, Colour Life listed on the Hong Kong exchange in 2014, becoming the first mainland property management company with a presence on the city’s main share-trading board. Pan, who serves as chairman of both companies, plans to extend Colour Life’s community services to 10,000 residential communities by 2020.
A number of leading property developers have accelerated their move into the property management sector to take a piece of the market pie. How do you see the competition?
Our key advantage is our team, which has rich experience in cost management and providing value-added services. We have acquired nearly 100 property management firms that suffered losses. If it was you, would you dare to buy them? Not everyone has the ability to transform these companies and turn losses into profits.
Is that because you hire talented people and pay them good salaries?
No, high salaries cannot solve the problems and property management is a very cost sensitive industry. We don’t pay much. We hire talent who have dreams and a passion for the industry.
Do you find it’s hard to expand your footprint further as many existing residential communities are owned by property giants such as Vanke and China Overseas Land and Investment, and they have their own property management team?
Vanke and Coli in total account for less than 1 per cent of market share. The market is highly fragmented and we have a lot of space to expand.
Our target is to cover 10,000 residential communities, or one billion square metres, by 2020. As we have already entered 175 cities, our major task now is to deepen our presence in each city.
Is Fantasia gradually exiting from real estate development to focus on an asset-light business?
We are not exiting, but strengthening property development. Through accumulated experience from community services, we found we could do a lot of innovative things, while traditional communities cannot tolerate such services.
Instead of imagining what clients need and then designing a home for them, now we turn to developing properties based on our findings and solutions summed up by years of services. It’s a bit like the iPhone introducing upgraded models to meet software requirements.
From this point, we realised we need our own property development [business] more than before, as other developers won’t produce what you need. Colour Life now gets involved in our development stage and raises requirements for things such as energy-efficient public lighting, community Wi-fi and charging stations.
We expect these communities, which are tailor-made to clients’ everyday needs, would have a higher sales premium. The first two pilot projects will be completed by early next year, located in Shenzhen and Suzhou respectively. In the long term, we hope property development and asset-light services could each contribute 50 per cent profit for the group.
You have diversified into many different businesses, from property management, financial services to tourism. Are you losing business focus?
I don’t think so. These value-added businesses are all to serve the broader concept of community service. So we are actually just doing one industry. For example, we would establish a platform to connect our customers with insurance companies and customers can buy products online.
What are the problems in China’s community service sector?
The community service industry is still at a very early stage in China, as it is a broader concept compared to traditional property management, covering new ideas such as community aged care and community education.
There has been a massive influx of capital into the sector, but I have to say it is not easy to survive and impossible to make money in the short term.
The service industry needs patience and artisan spirit to build up know-how. Refined service should be the soul of community service. The old times when property managers only take care of security and cleaning have already passed. Yet it is very hard to find talent in China with management expertise and a customer service mindset
In the traditional real estate development area, what are the new trends?
Developers are increasingly embracing the financial industry, including us. This is an inevitable trend. Land cost is skyrocketing. Nowadays it takes some billion yuan to buy a land parcel in cities like Shanghai or Beijing. Developers cannot afford plots with their own capital. Joint development with financial institutions can also spread the risk and save on financing cost.
Real estate companies eventually will either transform into financial institutions or become professional property builders and cooperate with financial institutions. Fantasia is transforming into a professional services company. In the long term, we would further cooperate with financial institutions to secure long-term capital.