Chinese property firms must focus on better communication to reap global rewards
Understanding the finer operational nuances is critical for success in overseas markets, says JLL official
With more than two decades of professional experience in the commercial real estate industry spanning across China, Australia and United States, Julien Zhang, managing director at JLL North China, has extensive commercial real estate experience in consulting, leasing and investment. He represents clients in a broad range of occupancy solutions including relocation and expansion projects, dispositions and consolidations. Prior to JLL, Zhang worked with the Kerry Group on positioning, planning and marketing of the Kerry Centre in Beijing. Zhang shares his insights on the Chinese commercial property market and the trends that are shaping the industry.
Can you tell us about the current state of the investment market in Beijing?
In terms of investment, the latest restrictions on Chinese companies’ outbound real estate investment have spurred an upsurge of interest in domestic property investments. Large quantity of Chinese capital is exploring expansion opportunities in the commercial sector, especially for offices. Though no major deals have been announced yet, there have been lots of enquiries and ongoing consultation, several of which could be reflected in subsequent transaction data. However, in terms of large-scale investment, Beijing is still way behind Shanghai. In 2016, the total value of large-scale transactions in Beijing reached US$7.14 billion, compared with US$15 billion in Shanghai. But we are hopeful that there would be several more deals in Beijing this year.
You have more than 20 years of commercial real estate experience in China and overseas markets. What was the situation like when you first joined the sector? What major changes have you witnessed in China’s commercial real estate sector?
When I first joined the industry more than two decades ago, there were very few quality offices in Beijing. That changed with more foreign companies starting to scout for office spaces. It was a market that was largely dominated by foreign tenants. The Beijing Kerry Centre in the Chinese capital’s busy Guomao area was a project that was close to my heart and an iconic project in 1999. But that has all changed now. Premium offices are proliferating in the Chinese capital and mainland companies account for more than 60 per cent of Beijing’s Grade-A office space market, and for about 40 per cent in Shanghai.
Have you encountered any major obstacles or rough patches in your professional career?
In 2010 China entered an economic upturn circle and there was a boom in Beijing’s office market. Net absorption that year surpassed 1 million square metres (last year it was 400,000 square metre). However that was a tough time for me, because the prosperity prompted agents across the city to expand massively, for which they had to hire more industry veterans. This led to rampant poaching, including from my company. I had to deal with a severe talent outflow. Talents are the most treasured assets in the property industry. We have invested a lot of resources to cultivate talents. Without talents everything is just empty talk.
Interestingly the time after 2008 financial crisis was much less painful than expected, because the downturn crimped the expansion and poaching plans of several companies.
With several Chinese companies expanding their overseas footprint, property leasing and investment activities have become important business segments for companies like JLL. Have you encountered any major challenges?
That is an interesting question. I head JLL’s China global service line, a special unit that leverages JLL’s global platform to assist Chinese companies witnessing rapid international growth with the necessary business location advisory, property purchase, investment and expansion strategy advisory services in complex overseas markets.
When Chinese companies enter a new market, they initially settle for small offices, usually in areas other Chinese companies are also present. But as they expand, they have to figure out how to find a suitable, much larger workplace, with some even needing to find a new plot of land to develop a customised building.
It is important that the Chinese firms not only know the various options, but also how to make it happen. As time passes, they’ll know that the “ways of doing things” is very different in foreign markets, where government is less important, and you have to deal with, and align various service providers.
We recently assisted a large Chinese company in an overseas office building development. Part of the challenge was to establish a solid cooperation platform between the company’s Beijing team and the overseas team. Success in overseas markets is not just about understanding professional terms, but in knowing what the actual requirement is, which in this case was better communication. By incorporating that in our strategy, we were able to boost the company’s efficiency.